Pres­i­dent Jin­ping backs stronger risk re­duc­tion role for China cen­tral bank

Muscat Daily - - BUSINESS -

Bei­jing, China - Chi­nese Pres­i­dent Xi Jin­ping said the cen­tral bank will play a stronger role in de­fend­ing against risks, call­ing for more work on safe­guard­ing the fi­nan­cial sys­tem and mod­ernising its reg­u­la­tory frame­work.

China will set up a fi­nan­cial sta­bil­ity devel­op­ment com­mit­tee un­der the State Coun­cil, Jin­ping said at a twice-a-decade Na­tional Fi­nan­cial Work Con­fer­ence held from Fri­day to Sat­ur­day, state me­dia re­ported with­out defin­ing the re­la­tion­ship with the Peo­ple’s Bank of China (PBOC). Fi­nan­cial se­cu­rity is part of na­tional se­cu­rity, and fi­nance should bet­ter serve the real econ­omy, Jin­ping said.

In a speech, Jin­ping said pru­dent monetary pol­icy, a goal an­nounced in De­cem­ber, should be firmly im­ple­mented and the PBOC should take a stronger macro-pru­den­tial pol­icy role. He also called for greater yuan ex­change-rate re­form, an im­proved for­eign-ex­change mar­ket sys­tem, and steady progress in yuan in­ter­na­tion­al­i­sa­tion, ac­cord­ing to state me­dia re­ports.

Pres­i­dent Jin­ping is ramp­ing up ef­forts to en­sure sta­bil­ity ahead of a twice-a-decade lead­er­ship tran­si­tion this fall at the 19th Com­mu­nist Party Congress. He has el­e­vated curb­ing risk in the US$40tn fi­nan­cial in­dus­try to a new level with ‘strate­gic im­por­tance’ amid in­creas­ingly in­ter- twined busi­ness be­tween China’s banks, bro­ker­ages, as­set man­agers and in­sur­ers.

Es­tab­lish­ing the com­mit­tee is note­wor­thy, though the meet­ing didn’t pro­duce much sur­prise, ac­cord­ing to Ming Ming, a former PBOC monetary pol­icy of­fi­cial who’s now head of fixed-in­come re­search at Citic Se­cu­ri­ties Co in Bei­jing. The name sig­ni­fies that the panel should be a min­istry-level en­tity di­rectly un­der the State Coun­cil that’s man­dated to over­see over­all fi­nan­cial co­or­di­na­tion, he wrote in a re­port on Sun­day.

China will proac­tively pre­vent and re­solve sys­temic fi­nan­cial risks, and step up ef­forts to re­duce lever­age in the econ­omy, the of­fi­cial Xinhua News Agency re­ported, cit­ing Jin­ping. He also called for greater ac­count­abil­ity for reg­u­la­tors, say­ing it’s a ‘dere­lic­tion of duty’ if they fail to spot and dis­pose of risks in a timely man­ner, and stressed that co­or­di­na­tion of fi­nan­cial reg­u­la­tion should be im­proved, and weak links in su­per­vi­sion strength­ened.

“The heavy em­pha­sis on risk pre­ven­tion will put a damper on much-needed re­form in the fi­nan­cial mar­ket,” such as de­vel­op­ing de­riv­a­tives mar­kets, said Vic­tor Shih, a pro­fes­sor at the Univer­sity of Cal­i­for­nia in San Diego who stud­ies China’s pol­i­tics and fi­nance. “With the word­ing on hold­ing reg­u­la­tors for any signs of in­sta­bil­ity, they will def­i­nitely err on the side of cau­tion. But if reg­u­la­tions are too sti­fling, fi­nan­cial tal­ent may leave the coun­try.”

Premier Li Ke­qiang also spoke at the meet­ing, call­ing for mod­er­ate credit growth and keep­ing liq­uid­ity ‘ ba­si­cally sta­ble’, ac­cord­ing to state tele­vi­sion. He backed ‘pro­fes­sional, con­sol­i­dated, pen­e­trat­ing’ reg­u­la­tion of all fi­nan­cial busi­nesses to re­duce risks.

More-cen­tralised reg­u­la­tory pow­ers are wel­come, though the plan sug­gests China wants fi­nan­cial mar­kets to be purely mech­a­nisms for na­tional devel­op­ment, not spec­u­la­tion, ac­cord­ing to Michael Every, se­nior Asia Pa­cific strate­gist at Rabobank in Hong Kong.

“It’s wor­ry­ing that yet an­other area of the econ­omy is now con­sid­ered na­tional se­cu­rity,” Every said. “That sends a strong mes­sage we can never have an­other crash, and that means we can’t have volatil­ity, and that means no real mar­kets, or per­haps no true role for for­eign play­ers as price set­ters.”

PBOC last year be­gan mea­sur­ing risk us­ing what it calls a macro pru­den­tial assess­ment sys­tem built on ex­am­in­ing banks’ cap­i­tal-ad­e­quacy ra­tios - a mon­i­tor­ing au­thor­ity once on the China Bank­ing Reg­u­la­tory Com­mis­sion’s turf.

(AFP)

Chi­nese Pres­i­dent Xi Jin­ping

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