Chinese president Xi Jinping has ordered the formation of a super regulator to oversee the entire financial sector and intensify moves to create financial stability.
The order is one step towards the execution of a plan that has been in the works for about a decade, which aims to consolidate the country’s fragmented financial regulatory structure.
The State Council will establish a Financial Stability Development Committee, which will serve as a coordinator between the separate regulators of the insurance, banking, and securities sector. Meanwhile, the central bank – the People’s Bank of China – will be given more powers to curb financial risks, reports Xinhua News Agency.
The specifics of new regulator’s functions are yet to be announced, but the central bank and the three regulatory agencies are confirmed to remain in place. Political and financial stability is of utmost importance for Xi and his government, as the ruling Communist Party convenes this August to select its officers to serve the next five-year term, reports the South China Morning Post.
Several financial scandals have rocked
China in the past few years, including a turbulent stock market in 2015, which resulted in trillions of yuan in losses. Last year, the insurance industry was jolted by a crisis which created exposures to systemic risk, culminating in the investigation and dismissal of Xiang Junbo, former head of the China Insurance Regulatory Commission.
“The eternal theme of financial work is to prevent systemic financial risks,” Xi was quoted by Xinhua. The President ordered regulators and local governments to monitor risks, as well as intervene to keep the size of local government debts under control.
Xi placed emphasis on the government’s role to “ensure the right direction of financial reform and development” while letting market forces decide on the allocation of financial resources.
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