China shake-up revamps financial bodies
New ministries created to regulate the banking and insurance sectors
CHINA is merging its banking and insurance regulators, giving new powers to policy-making bodies such as the central bank and creating new ministries in the biggest government shake-up in years.
The revamp is a cornerstone of President Xi Jinping’s agenda to put the leadership of the ruling Communist Party squarely at the heart of policy, with Xi himself at the core of the party.
The economy and the party have become more intertwined since a party congress in October, when Xi consolidated his grip on power, with party control deemed necessary to help push through reforms. On Sunday, presidential term limits were removed from the state constitution.
“Deepening the reform of the party and state institutions is an inevitable requirement for strengthening the longterm governance of the party,” Liu He, Xi’s top economic adviser and confidante, wrote in a commentary in the official People’s Daily. “Strengthening the party’s overall leadership is the core issue,” he said.
The commentary suggested the party would have a greater influence and say in the government, or the State Council, which is headed by Premier Li Keqiang, some analysts say.
The long-awaited move to tighten oversight of China’s $42 trillion (R496trln) banking and insurance sectors comes as authorities seek more clout to crack down on riskier lending practices and reduce high corporate debt levels.
“The biggest news is still about the merger of the financial regulators. The central bank will be in charge of the macro supervision side, while the merged regulators will be
responsible for the more concrete part of things,” said Zhou Hao, a senior emerging-markets economist at Commerzbank.
China will also form a national markets supervision management bureau, according to a parliament document released yesterday.
The bureau will take on the pricing supervision and anti-monopoly law enforcement role from the state economic planner, the National Development and Reform Commission, the Ministry of Commerce and the State Council.
China is among the global economies seen as most vulnerable to a banking crisis, the Bank for International Settlements said at the weekend, although Beijing has maintained that debt risks are under control.
Speculation that Beijing was considering creating a super financial regulator had been rife since the Chinese stock market crash of 2015, which was blamed in part on poor inter-agency co-ordination.
The merger of the China Banking Regulatory Commission (CBRC) and the China Insurance Regulatory Commission (CIRC) is aimed at resolving problems such as unclear responsibilities and cross-regulation, according to the parliament document.
The CBRC was carved out of the central bank in 2003, while the CIRC was created in 1998.
The new merged entity will report directly to the State Council.
The function of making important laws and regulations of the CBRC and CIRC will be transferred to the People’s Bank of China as the central bank takes on a bigger role.
China’s financial system has become increasingly tough to regulate as it grows rapidly in size and complexity, emerging as one of the world’s largest with financial assets at nearly 470 percent of gross domestic product, according to the International Monetary Fund. – Reuters