New efforts to ward off risks
Policymakers feel need to hasten reforms
China’s regulators are stepping up their efforts to fend off risks in the country’s financial markets and address persistent challenges, amid what observers called frustration among some policymakers over slow progress in market reforms and continuing problems.
While avoiding financial risks and carrying out market reforms have long been among top priorities for policymakers, a series of recent events – including high-profile insider trading cases, fraudulent online lending and turmoil in the stock market – have revealed lingering problems in the country’s financial system and show the need for urgent measures, experts said.
In recent days, Chinese regulators have had several meetings focused on a wide variety of topics, signaling that they are moving toward a more targeted approach to problems in the country’s massive and extremely complex financial market.
The People’s Bank of China (PBC), the central bank, called in top officials from the country’s financial regulators, former senior officials, bank executives and prominent experts for a meeting on managing market expectations on Friday, according to a PBC statement on Monday.
The meeting also focused on improving communication between regulators and the market, accurately predicting and analyzing economic and financial performance, and communicating policy decisions, the statement read.
While the PBC did not disclose further details, the meeting shows that regulators want to stabilize market expectations that have led to instability in the financial market, said Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology.
“Right now, investors’ expectations for the market are distorted and that is a very big risk,” Dong told the Global Times, pointing out that the market is filled with millions of individual investors who are only “betting on short-term gains” rather than investing “rationally” for the long term. “So to effectively stabilize market expectations and guide investors toward long-term investment is an important task.”
Tightened regulation
Apart from the meeting on Friday, Chinese regulators also held several other meetings last week, including a conference convened by the China Securities Regulatory Commission (CSRC) on protecting investors and a discussion held by the CSRC on market regulations for regional equity markets.
The China Banking and Insurance Regulatory Commission also held a meeting on August 29 focused on regulations and a three-year action plan for resolving risks in the country’s banking and financial sectors.
Li Daxiao, chief economist at Shenzhen-based Yingda Securities, said that all the meetings show regulators feel the need for urgency in their efforts to fend off financial risks by tackling specific problems.
“After these meetings, I expect there will be more actions on further resolving financial risks. Regulation will be tightened,” Li told the Global Times, noting that specific measures will also be taken to help small and mediumsized enterprises raise funds and address local debts.
The meetings followed a series of actions regulators have taken in recent weeks to crack down on illegal activities, including insider trading cases involving high-profile movie stars and fraud in online peer-to-peer lending.
The crackdown and the recent problems show the persistent challenges facing the Chinese financial system despite the reform efforts, Dong noted.
“We have been carrying out market reforms for the financial sector for years, but there are still so many challenges. That shows the market implementation might not have been moving at the pace regulators want, prompting them to hold all these meetings to discuss how to move forward,” he said.
“We have been carrying out market reforms for the financial sector for years, but there are still so many challenges.”
Dong Dengxin Director of the Finance and Securities Institute at the Wuhan University of Science and Technology