Daily Management Review

China is stepping up the fight against financial risks


Last weekend, Chinese President Xi Jinping said that the country's central bank will play a more significant role in protecting against risks, and called for increased measures to protect the financial system and modernize its regulatory framework, reports Bloomberg.

faungg's photos
faungg's photos
Shares of Chinese companies with small capitalization fell on Monday amid fears of tightening regulation. This, in turn, led to a decline in the stock indices of the country.

Xi Jinping told that the Chinese government is going to establish the Committee for the Development of Financial Stability under the State Council, the state media reported, without clarifying the committee's links with the People's Bank of China. Financial security is part of national security, and finance should serve the real economy better, Xi said.

In his speech, Xi noted that sound monetary policy, the goal announced in December, should be firmly adhered to, and the People's Bank of China should assume a more significant role in macro prudential policy. He also called to reform the renminbi exchange rate, improve the foreign exchange market system and aim at steady progress in the internationalization of the renminbi, China's state media reported.

China is stepping up efforts to ensure stability on the eve of the XIX Congress of the Communist Party of China, after which top leadership in the party and in the country will change. Xi Jinping brought a new level of risk containment in the financial industry with a volume of $ 40 trillion.

Establishment of the committee deserves attention, although the meeting was not particularly surprising, notes Ming Ming, a former representative of the People's Bank of China, who now heads the bond market research department at Citic Securities Co. The committee’s name means that it should be a ministerial-level structure of the ministry level, be directly administered by the State Council and monitor overall financial coordination, Ming Ming wrote in his report on Sunday.

China will actively prevent and eliminate systemic financial risks, as well as intensify efforts to reduce the level of use of borrowed funds in the economy, says Xinhua news agency. Xi Jinping also called for greater accountability of regulators, saying that it was "non-performance" if they failed to identify risks in time and get rid of them. The PRC President stressed that it is necessary to improve coordination of financial regulation and strengthen weak links in supervision.

"A big focus on risk prevention will prevent much-needed reform in the financial market, particularly in the emerging derivatives markets," said Victor Shih, a professor at the University of California, San Diego, who studies China's politics and finances. "If regulation is too tough, financial talents can leave the country," he added.

Premier of the State Council Li Keqiang also spoke at the meeting, saying that it is necessary to moderate growth in lending and maintain "basically stable" liquidity, the state television reports. He supported the "professional, consolidated, insightful" regulation of all financial enterprises to reduce risks.

Rabobank’s senior Asia-Pacific market strategist in Hong Kong Michael Every welcomes more centralized regulation in China. At the same time, he said, the plan means that China wants financial risks to be in pure form a mechanism of national development, rather than speculation.

"It is worrying that another sphere of the economy is being considered within the framework of national security," Every said. "This gives a clear signal that we will never see a new fall, which means that there will be no volatility. This means absence of real markets or, possibly, lack of a real role for foreign players as price-makers". 

The Chinese authorities’ statements are reflecting growing vulnerability of the financial system and growing desire of the government to prevent a destabilizing shock, said Rajiv Biswas, chief economist for the Asia-Pacific region of IHS Markit in Singapore. "The main priorities for the People's Bank of China and the new commission will be stabilization of non-performing loans in the banking system of China, management of risks of shadow banking and risk management associated with the growth of corporate debt," he said.

source: bloomberg.com

Science & Technology

Scientists Discover Largest Ever Under Water Volcanic Eruption Near New Zealand

Bitcoin craze increased load on the power grid to the maximum

PC And Server Performance Slows Down Due To Security Patches For Chip Flaws, Says Microsoft

Cybersecurity Firm Claims Cryptocurrency Monero Might Be Getting Funneled To North Korea University

The Way We Travel Will Be Changed by The Colorless, Odorless Gas - Hydrogen

EU's Big Change In Data Protection Rules Makes Businesses To Get Ready For It

Artificial Intelligence Helps NASA Find An 8th Planet In Orbit Of A Distant Star

Australian Research Success Could Mean Shatterproof Cell Phones Could Soon Be A Realityv

Top ten hi-tech events of the year

Tesla Considering Designing And Developing AI Chips On Its Own To Support Its Auto-Pilot Project

World Politics

World & Politics

Take and go away: new approach to refugees in Europe

Both The Korean Countries Will Come Together In Olympic Talks

Parties of Germany agreed on the migrants problem

Munich Re: Natural disasters caused record damage in 2017

High-Level Talks To Be Held Between North And South Korea In Over Two Years

Sexually Abusing Children Interests An Estimated 20,000 British Men, Shows Police Monitoring Of Chat Sites

2018 Could See An Increase In Terror Attacks Where Both ISIS As Al-Qaeda Continue To Present Threats

What will happen to European populism in 2018?