China shake-up re­vamps fi­nan­cial bod­ies

New min­istries cre­ated to reg­u­late the bank­ing and in­sur­ance sec­tors

The Star Late Edition - - BUSINESS REPORT | INTERNATONAL - Shu Zhang and Se Young Lee

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 ing 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

Chi­nese state coun­cilor Wang Yong speaks dur­ing the fourth ple­nary ses­sion of the 13th Na­tional Peo­ple’s Congress at the Great Hall of the Peo­ple in Bei­jing, China yes­ter­day.

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