China’s Financial Stability and Development Committee Highlights Maintenance of Stable Macro-policy, Focus on Reform of Regional Finance

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China’s Financial Stability and Development Committee (FSDC) has sent a slew of key policy signals at its 50th meeting convened by Vice Premier Liu He on 8 April.

The FSDC committed to the “maintenance of continuous, stable and sustainable macro-financial policy,” as well as “steady monetary policy and maintaining the fundamental stability of the renminbi exchange rate at a rationally balanced level.”

“The primary mission of macro-policy is protecting employment and protecting market actors,” said the FSDC.

“[We] will focus on vigorously supporting private and micro, small and medium-sized enterprises to develop in a health manner, ‘providing water to raise fish,’ helping enterprises to alleviate difficulties, and better stimulating the vitality of micro-market actors.”

FDRC also highlighted the importance of efforts to spur the development of China’s capital markets.

“[We] will maintain [a position ] of ‘establishing systems, non-interference and zero-tolerance,’ and continue to strengthen the development of capital market infrastructure, in order to protect the interests of investors and spur the stable and healthy development of capital markets.

“[We] will firmly and unwaveringly deepen reforms, expand opening, strengthen international cooperation and drive high-quality economic growth.”

FDRC also highlighted efforts to develop China’s regional financial markets.

“The Chinese Communist Party and the State Council are focused on the sustainable development of regional financial institutions, and after many years of reform, China has gradually explored and formed a financial institution organisational system which suits China’s national circumstances, in which large, medium, small and micro-financial institutions engage in the division of labour and coordinated operation.

“Regional financial institutions are the capillaries of financial system, and overall quality management capability and marketisation levels continue to rise, playing an irreplaceable role in areas including servicing the Three Nongs, and grass-roots, micro, small and medium-sized enterprises.

“At the same time, some regional financial institutions are exposed to risk, and internal management and external regulation are in need of improvement. This requires a high-level of attention.”

The FSDC said that improvements to regional financial ecosystems would have the goal of “optimising the financial supply-side system” and “expediting the effectiveness of micro-economic management mechanisms.”

Futures areas of focus for improvements to Chinese regional finance will include:

  1. Structural optimisation, supporting and guiding regional financial institutions in focusing on their primary operations, establishing themselves locally and returning to “the source;” upholding the stance of servicing the region and servicing micro and small-enterprises. In accordance with the principles of the market and rule of law, encouraging institutions to take-over risky institutions, and expediting a balance in the regional financial supply and demand structure.
  2. Strengthening regulation, improving quality and effectiveness. Financial regulatory authorities must strengthen regulation of shareholders and real controllers, risk concentration levels, affiliate transactions and the veracity of data. They should make full use of modern information technology methods, strengthen the development of regtech, and raise the efficiency and coverage of regulation.
  3. Improvement to management and standardised operation. Local financial institutions must improve corporate governance, strengthen risk management, strengthen prudential operation, and refrain from the excessive pursuit of growth in scale and rapid growth. The development of the CCP must be strengthened, with firm penalties for corruption and “zero tolerance” for conduct in breach of laws and regulations.
  4. Improve the rule of law and strengthen vitality. Further clarify the the divide between the government and the market, and correct inappropriate interference. Improve regional financial ecosystems, and stimulate the creative and innovative vitality of local financial institutions.

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