China's 461 trillion yuan (US$63.7 trillion) financial industry and its regulatory regime have been given high priority in a broader economic restructuring initiated by the country's top leadership, with the sector expected to achieve sustainable growth and global will be reorganized to meet national goals such as technological advancement. Race.
The article said, “China has cyclical and comprehensive problems in economic development, but the structural problems are the most obvious, and the main contradictions are on the supply side.” The article was published on Wednesday and was attributed to the CFC Directorate, which is headed by Vice Premier He Lifeng.
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“The key to promoting high-quality financial development is to deepen structural reforms on the financial supply side.”
CFC's comments follow President Xi Jinping's declaration that the country will become a “financial superpower” at the twice-a-decade Central Financial Work Conference in October, and his speech in January about what this means. This is based on what was discussed in more detail in . .
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The CFC, which is responsible for coordinating financial regulation and de-risking this effort, sets out broad goals for the sector in the article. These include scientific and stable financial management systems and better structured financial markets.
“We need to strengthen the adaptability, competitiveness and inclusiveness of the financial system,” the commission said.
Like it or not, banks and other institutions should expect top-down direction and review.
It also mandated that Chinese financial institutions be “more efficient” than their peers in the capitalist world and provide comprehensive and accessible services in pursuit of common prosperity.
“Whether they like it or not, supply-side banks and other institutions should expect top-down direction and review from CFCs,” said Zhu Tian, a professor at the China European International Business School (CEIBS). .
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He said the use of the term “supply side” reflects the Chinese government's prioritization of financial institutions in reforms.
“To adapt, management and stakeholders need to understand the Chinese government's logic,” Zhu said. “Changes are occurring and old business and revenue models may no longer apply. [They] It might even put them in trouble. ”
China currently has the world's largest banking sector, and its capital market is only second in size to that of the United States. Banks are primarily owned by various levels of government and account for approximately 90 percent of a country's financial assets.
Reforms that benefit the real economy are long overdue.
Despite the growing presence of foreign companies, their share in China's banking industry is only about 1%, and their share in the bond and stock markets is less than 3%. Estimated.
One potential outlet for structural changes in the financial system could be the proportion of direct financing.
“Reforms that will benefit the real economy are long overdue,” Hu said.
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According to data from the central bank, the People's Bank of China, direct financing, including bonds and stocks, will account for 31% of total social financing in 2023, with bank loans accounting for most of the rest.
In the Study Times article, the CFC called for a coordinated and holistic approach to reform and management.
He called for joint efforts, saying that all levels of government, including financial regulators, economic and industrial planners, judicial authorities, and disciplinary inspection bodies, have “according responsibilities.”
CEIBS's Zhu said Chinese financial actors will need to embrace these changes, including new responsibilities that were previously outside their scope, but will also make clearer what is expected of them. He said more detailed measures needed to be developed.
“The financial reform narrative is full of generalities, but vague about concrete, actionable measures,” he added.
“After declaring what China's financial sector should be, the Chinese government should shift its focus to how it should be done.”
