China’s top banking sector official has highlighted ongoing efforts by regulators to stymie the onset of financial risk in 2023.
“With the combined impact of multiple factors, financial risk is still at the stage of ready and frequent occurrence” said Guo Shuqing (郭树清), party secretary of the Chinese central bank and chair of the China Banking and Insurance Regulatory Commission (CBIRC), in a recent interview with state-owned media.
Guo highlighted a range of focal areas for risk-prevention efforts by Chinese financial regulators in 2023, including:
- Focus on regular circulation between real estate and finance. Implementation of the “16 Financial Measures” (金融十六条). Making guarantees for the delivery of housing the entry point, and improvements to the balance sheets of high-quality leading property enterprises the focal point. Expediting the stable and healthy development of the real estate sector. Gradually driving the real estate sector to transition towards new development models.
- Actively and steadily driving risk disposal for small and medium-sized financial institutions. Effectively disposing of risk at small and medium-sized financial institutions. Deepening reform of rural credit societies with policies tailored to suit local conditions. Steadily implementing reform and restructuring of rural village banks. Making full use of the specialised disposal function of deposit insurance and other industry guarantee funds, as well as the financial stability guarantee fund. Strengthening across-the-board regulation of shareholders and actual controllers.
- Dealing in advance with the risk of a rebound in non-performing assets. Guo said that in recent years, China had continued to expand the intensity of disposal of non-performing assets, with a figure in excess of 3 trillion yuan for the past several consecutive years. According to Guo, the next step will be to continue to strictly control growth in non-performing assets, make full provisions, and expand the intensity of disposal efforts.
- Actively cooperating in the disposal of hidden local government debt risk. Overseeing the strengthening of the risk management capability of financial institutions. Orderly undertaking of swaps of local government debt, driving optimisation of the debt term structure, and reducing interest rate burdens.
- Lawfully and fully including all forms of financial activity within the purview of regulation. Guo highlighted the need to deal with “breaches of regulations by license holders” in addition to “license-free driving,” as well as strict prohibitions on the provision of guaranteed fixed returns or expected rates of returns for asset management products. Strict standardisation of the cross-regional deposit-taking and lending operations of local financial institutions.