New body to over­see key fi­nan­cial poli­cies

China Daily (USA) - - BUSINESS - By CHEN JIA chen­jia@chi­nadaily.com.cn

China’s newly launched cab­i­net-level com­mit­tee, in charge of fi­nan­cial sta­bil­ity and re­form plan­ning, is ex­pected to take re­spon­si­bil­ity for co­or­di­nat­ing mone­tary, fis­cal and in­dus­trial de­vel­op­ment poli­cies, to bet­ter serve the real econ­omy while avoid­ing con­flicts.

The com­mit­tee, led by the State Coun­cil with Vice-Pre­mier Ma Kai as its head, will have a higher ad­min­is­tra­tive level above the ex­ist­ing fi­nan­cial reg­u­la­tory struc­ture com­posed of the cen­tral bank and the bank­ing, se­cu­ri­ties and in­surance reg­u­la­tory com­mis­sions, an­a­lysts said.

In­ap­pro­pri­ate fis­cal pol­icy, such as the un­con­trolled ex­pan­sion of lo­cal gov­ern­ment debt in or­der to pur­sue high GDP growth, should be cracked down by the com­mit­tee as a rapid in­crease in lo­cal gov­ern­ment bor­row­ing may spark a sys­temic fi­nan­cial cri­sis, said Qiu Gao­qing, chief re­searcher with the Bank of Com­mu­ni­ca­tions’ fi­nan­cial re­search cen­ter.

In terms of in­dus­trial de­vel­op­ment poli­cies, he said, the gov­ern­ment should pre­vent blind over-in­vest­ment in in­dus­tries with a high-lever­ag­ing level and over­ca­pac­ity, which also needs a high-level co­or­di­na­tion scheme.

That means the fi­nan­cial reg­u­la­tory in­sti­tu­tions will work with the Min­istry of Fi­nance and the Na­tional De­vel­op­ment and Re­form Com­mis­sion un­der the co­or­di­na­tion scheme of the new com­mit­tee, said an­a­lysts.

Dong Ximiao, a se­nior re­searcher at Chongyang In­sti­tute for Fi­nan­cial Stud­ies at Ren­min Univer­sity of China, said that in­dus­try pol­icy should be the core. Once the long-term and rel­a­tively sta­ble in­dus­trial de­vel­op­ment goals are set, mone­tary and fis­cal poli­cies should fol­low that.

“To im­prove the ef­fi­ciency of pol­icy co­or­di­na­tion, proper tools should be cho­sen to build a bal­anced pol­icy struc­ture,” said Dong.

A re­port from Eco­nomic In­for­ma­tion Daily, a news­pa­per un­der Xin­hua News Agency, said that the Fi­nan­cial Sta­bil­ity and De­vel­op­ment Com­mit­tee will also play a role in co­or­di­nat­ing reg­u­la­tions among the Peo­ple’s Bank of China, the China Bank­ing Reg­u­la­tory Com­mis­sion, the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion and the China In­surance Reg­u­la­tory Com­mis­sion.

The cen­tral bank and the three reg­u­la­tory com­mis­sions will make poli­cies in­de­pen­dently as be­fore, but they should put th­ese on the com­mit­tee’s records, said the ar­ti­cle. “For cross-in­dus­try and cross-mar­ket reg­u­la­tory poli­cies, the com­mit­tee will co­or­di­nate with those in­sti­tu­tions to jointly make a draft.”

Be­sides, the role and re­spon­si­bil­ity of the cen­tral bank needs to be fur­ther clar­i­fied, said an­a­lysts. Hav­ing the func­tion as the com­mit­tee’s of­fice, the PBOC will lead the com­mit­tee’s oper­a­tions, in­clud­ing draft­ing sig­nif­i­cant plans of fi­nan­cial re­form and de­vel­op­ment, an­a­lyz­ing the fi­nan­cial sys­tem’s run­ning con­di­tion, con­trol­ling fi­nan­cial risks, and as­sess­ing the com­mit­tee’s oper­a­tions, said Qiu.

Zhou Xiaochuan, gov­er­nor of the Peo­ple’s Bank of China, the na­tion’s cen­tral bank, said at the Group of 30 In­ter­na­tional Bank­ing Sem­i­nar in Washington DC last month, the Fi­nan­cial Sta­bil­ity and De­vel­op­ment Com­mit­tee will fo­cus on reg­u­la­tions of four ar­eas: shadow bank­ing, as­set man­age­ment sec­tor, in­ter­net fi­nance or fin­tech, and fi­nan­cial hold­ing com­pa­nies.

“We will fur­ther deepen re­form, grad­u­ally push for­ward the delever­ag­ing process, and strengthen reg­u­la­tory co­or­di­na­tion to pro­mote healthy de­vel­op­ment of the fi­nan­cial mar­kets and main­tain fi­nan­cial sta­bil­ity,” said Zhou.

We will fur­ther deepen re­form, grad­u­ally push for­ward the delever­ag­ing process, and strengthen reg­u­la­tory co­or­di­na­tion to pro­mote healthy de­vel­op­ment of the fi­nan­cial mar­kets and main­tain fi­nan­cial sta­bil­ity.” Zhou Xiaochuan, gov­er­nor of the Peo­ple’s Bank of China

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