Rising security risks raised at financial forum
CHINESE financial sector officials and analysts recently warned of global financial security risks posed by rising geopolitical tensions and United States-led aggressive monetary policies, urging various measures to identify and tackle risks.
Amid growing global financial turmoil, tackling such risks became a hot topic at this year’s Financial Street Forum, a high-level conference often described as the bellwether of China’s financial reform.
Speakers at the annual event, which had financial development and security under global geo-economic challenges as its theme and which was held early last week, included Xioa Gang, former head of the China Securities Regulatory Commission, and Li Jun, deputy head of the Export-Import Bank of China.
Xiao said China should improve financial security governance in several aspects, including the speedy approval of a financial security law and building a financial safety net using methods such as enriching policy toolboxes and improving risk monitoring, assessment, early warning and correction mechanisms.
Li warned that instability was rising in global markets, and the chances of “black swan” or “gray rhino” events were growing.
Awareness of potential risks in the global financial sector has increased in China, as world financial markets are becoming more volatile in response to the central bank policies of the US and other majority, as well as turbulent geopolitics.
Chen Jia, an independent international strategy analyst, said sanctions imposed by Western countries on the Russian economy and financial sector over its invasion of Ukraine had greatly harmed global financial security this year.
According to Chen, Washington has taken advantage of the US dollar system’s hegemony in the global economy and trade to place restrictions on Russia’s financial transactions, which poses a serious threat to the East European country’s sovereign financial security.
“Global fintech, data safety and financial market stability mechanisms all underwent sharp changes amid the Ukraine crisis, and no incident can be compared to it recently in terms of the intensity of the impact on global financial security,” Chen told Beijing-run tabloid Global Times.
Yang Haiping, general manager of the research and development department at the Bank of Inner Mongolia, told Global Times that geopolitical tensions and changes in global liquidity were the biggest threats to global financial security now, and a financial crisis would be hard to avoid if the international community failed to strike deals on greater financial collaboration.
Li noted in his speech that maintaining international financial security faced challenges nowadays, as many central banks were increasing interest rates, disrupting market pricing mechanisms and worsening asset-price fluctuations.
The Federal Reserve is still in the middle of a hawkish interest rate hike cycle this year, trying to tamp down soaring inflation, with the pace of the hikes the fastest in decades. The move has weakened other currencies, including the euro, yen and yuan, while also causing volatility in stock markets.
In 2022 so far, the Dow Jones has plunged by about 8 percent, while the Nasdaq is down nearly 30 percent.
Experts say that China has so far stayed “within the safe boundaries” in terms of financial operations, though it is also facing dual pressures from internal and external markets that pose some financial risks.
From Yang’s point of view, China still faces spillover financial risks in certain areas against the backdrop of high leverage, such as real estate, while overseas risks mainly come from “financial attacks” by certain forces and spillovers from global markets.
“China should keep the focus of financial security work within China, but still pay special attention to external shockwaves,” Yang told Global Times.
Li said China should enhance its awareness of and ability to prevent and eliminate hidden dangers to keep risks under control, by keeping a certain level of risk appetite and carrying out stress tests.
Also, China should deepen communication and cooperation in the financial sector through such methods as establishing a regular coordination platform network to help financial institutions cooperate.
This article was first published in the Global Times on Nov. 22, 2022. The Global Times is an English-language Chinese tabloid under the People’s Daily, the flagship newspaper of China’s ruling Communist Party.