The head of the People’s Bank of China has indicated that the opening of the Chinese financial sector will be a measured and conditional undertaking.
In a speech delivered at the Financial Street Forum in Beijing, PBOC chief Yi Gang said that the extent to which China’s finance sector is opened will need to match prevailing regulatory capabilities.
“China’s internal and external financial opening does not mean that the doors of the state will be opened wide all at once,” said Yi.
Yi’s most recent remarks echo other calls within China for heightened financial regulation to deal with the risks involved in further opening of Chinese finance.
Yi nonetheless reiterated the Chinese central bank’s commitment to further opening of the financial sector.
“The Chinese central bank is advancing other financial reforms and opening measures in an orderly manner…Chinese finance still has considerable room for further opening, and the further internal and external opening of Chinese finance is a current and future focal point for work.”
Yi also said that opening of the financial sector, marketisation reforms of exchange rate mechanisms and capital account convertibility jointly comprise a “three-horse chariot” that will require mutual coordination and joint advancement.
Both Yi and President Xi Jinping stressed China’s commitment to further reform and opening of the economy, and the financial sector in particular, at the 2018 Bo’ao Forum for Asia in early April.
Beijing subsequently pushed through measures to raise or completely rescind foreign ownership thresholds for key financial institutions in China, including securities companies, fund managers, futures brokers and life insurers.
The move has prompted a slew of leading global financial institutions to announce plans to enter the Chinese market, including UBS, Nomura, JPMorgan Chase & Co, S&P Global and Fitch Ratings.
Outside observers have expressed skepticism about the extent to which Beijing will be willing to open up financial markets, however, with the Asia Securities Industry & Financial Markets Association (Asifma) pointing to regulations that will continue to make it extremely difficult for international investment banks to become the controlling shareholders of Chinese financial institutions.
Chief amongst them is the requirement that holding companies planning to obtain controlling stakes in joint-ventures possess a net asset value of at least 100 billion yuan (approx. USD$15.9 billion), as outlined by a consultation paper launched by the China Securities Regulatory Commission in March.
Domestic analysts say that the opening of the Chinese financial sector will require heightened caution from regulators.
“China is totally unprepared for opening up,” said Xiang Songzuo, a researcher from Renmin University in Beijing to the South China Morning Post.
“If we open up when the domestic institutions are unprepared, any promise [of reward and growth] made by the government won’t become reality.”
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