Premier Li Keqiang says that China is capable of preventing the onset of systemic risk in the financial sector.
Li made the remarks at a press conference held on 20 March, following the closure of the 13th National People’s Congress.
“I must say responsibly that China possesses the capability to prevent, and there will also not arise, systemic financial risk.
“Because the Chinese economy’s fundamentals are good, its financial performance is also sound and stable. Of course, given that the Chinese economy’s total scope is over 80 trillion yuan, and it has over 250 trillion yuan in banking assets, it’s not possible for me to say that there isn’t any risk at all.
“Our banking sector capital adequacy ratio and provisions coverage ratio are quite high, and higher than international standards…at present our commercial bank statutory reserve ratio is around 15%, which is equal to more than 20 trillion yuan reserves.
“This year we will actively reduce the deficit rate, because last year the Chinese economy improved amidst stability, and excess fiscal revenues surpassed expectations.
“The central government’s finances saw excess revenues of over 250 billion yuan, which we didn’t use, and have placed for the current year.
“Additionally the first two months of the year saw double digital growth in fiscal revenues, and we are fully confident and optimistic about fulfilling this year’s key full year economic and social development targets and future growth expectations.
“Consequently in future we will work hard in this direction to continue to reduce the deficit ratio. Of course, reducing the deficit ratio doesn’t mean changing the direction of active fiscal policy.
“Of course, the financial sector also has certain illicit and illegal behaviour or regulatory avoidance which is creating turmoil.
“Recently our regulatory departments have taken action and engaged in resolute handling, needing to ensure that this scattered risk does not spread. ‘Boils’ that should be pierced must be pierced, otherwise there will be moral hazard.
“Additionally, during the process of handling, we must pay attention to protecting the lawful rights and interests of consumers and accumulating experience. When similar problems arise in future, we will be capable of resolutely dealing with them.
“Our current institutional reforms involve the merger of the China Banking Regulatory Commission with the China Insurance Regulatory Commission, in order to prevent the onset of regulatory avoidance.
“Of course there is also the old problem of illegal fund-raising, which the government will continue to strike at with vigour.”