China to es­tab­lish fi­nan­cial se­cu­rity re­view by 2020

The Pak Banker - - 6BUSINESS -

China will es­tab­lish fi­nan­cial se­cu­rity re­view and counter-sanc­tion mech­a­nisms by 2020, ac­cord­ing to the draft out­line of the 13th Five-Year Plan re­leased Satur­day.

De­tails about the mech­a­nisms, only listed within a para­graph on the pru­dent open­ing up of the fi­nan­cial sys­tem, were not dis­closed in the plan sub­mit­ted to the na­tional leg­is­la­ture for ex­am­i­na­tion.

In a Novem­ber ar­ti­cle in the Peo­ple's Daily, flag­ship news­pa­per of the Com­mu­nist Party of China, cen­tral bank gov­er­nor Zhou Xiaochuan men­tioned the term "fi­nan­cial se­cu­rity re­view" as part of a na­tional fi­nan­cial se­cu­rity mech­a­nism to pre­vent sys­tem­atic fi­nan­cial risks.

Fi­nan­cial se­cu­rity is im­por­tant for over­all na­tional se­cu­rity, and the suc­cess of fi­nan­cial re­form de­pends on main­tain­ing fi­nan­cial se­cu­rity. Ro­bust pub­lic con­fi­dence in the fi­nan­cial sys­tem is the ba­sics of fi­nan­cial se­cu­rity, Zhou wrote. More­over, The Chi­nese econ­omy "faces rel­a­tively se­ri­ous risks and chal­lenges" but re­mains healthy, and pol­i­cy­mak­ers have am­ple pol­icy op­tions at hand to cope with the "com­pli­cated sit­u­a­tion" this year, said Xu Shaoshi, head of the Na­tional De­vel­op­ment and Re­form Com­mis­sion, the top eco­nomic plan­ning body, on Sun­day.

"We should not use tra­di­tional and old meth­ods to look at the Chi­nese econ­omy," Xu said, re­fer­ring to the down­grad­ing of China's govern­ment credit rat­ings by the in­ter­na­tional rat­ing agency Moody's on March 2. While its eco­nomic growth rate re­mains fast at 6.9 per­cent year-on-year in 2015, China's eco­nomic struc­ture and qual­ity have im­proved sig­nif­i­cantly, he said. A to­tal of 13.12 mil­lion new jobs were cre­ated in 2015, ex­ceed­ing the tar­get of 10 mil­lion. Peo­ple's in­comes in­creased by 7.4 per­cent, faster than the GDP growth. Also, the growth of con­sumer in­fla­tion re­mained at a mod­er­ate 1.4 per­cent.

Mean­while, China will be able to keep fi­nan­cial risks un­der con­trol as fi­nan­cial pro­cesses de­velop, a se­nior of­fi­cial of China's cab­i­net re­search of­fice said Satur­day.

China's fi­nan­cial sys­tem is sound over­all, al­though the overuse of some fi­nan­cial tools could cause cer­tain risks, said Huang Shouhong, deputy di­rec­tor of the State Coun­cil Re­search Of­fice, at a news con­fer­ence.

The govern­ment pays high at­ten­tion to po­ten­tial risks, such as bad loan ra­tio in­creases, and many fi­nan­cial reg­u­la­tors have also taken spe­cific mea­sures to cush­ion against the risks, Huang said. Of­fi­cials have vowed fi­nan­cial sys­tem re­form will be more in­no­va­tive, so that they will sup­port the real econ­omy. The govern­ment will en­cour­age fi­nan­cial in­sti­tu­tions to of­fer new con­sumer credit ser­vices to boost con­sump­tion, ac­cord­ing to a govern­ment work re­port de­liv­ered by Premier Li Ke­qiang at the an­nual par­lia­men­tary meet­ings on Satur­day.

The work re­port also en­cour­aged banks to use both equity in­vest­ment and loans to fi­nance com­pa­nies, a move that is con­sid­ered help­ful es­pe­cially for early- stage firms seek­ing in­vest­ment. China's con­sump­tion has con­trib­uted to 66.4 per­cent to GDP growth, sig­nal­ing the head­way China has made in mak­ing growth more con­sump­tion-driven and sus­tain­able.

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