Beijing has appointed Li Yunze, a veteran of China’s big state-owned banking sector, to head the new financial super-regulator created at the Two Sessions congressional meeting for 2023. The move marks the first time a Chinese official born after 1970 has been appointed to a ministerial position.
Chinese policymakers hope that the creation of the new authority will help drive the development of a “Twin Peaks” financial regulatory model that establishes separate authorities for the preservation of systemic stability on the one hand, and the supervision of market conduct and consumer protections on the other.
China creates new financial super-regulator
The 2023 “Two Sessions” meeting of China’s congressional bodies held in March saw a bold restructuring of the financial regulatory system.
Chief amongst the sweeping changes was the creation of a new financial super-regulator – the State Administration for Financial Regulation (SAFR) ((国家金融监督管理总局), to replace the China Banking and Insurance Regulatory Commission (CBIRC).
The move brings an end to the regulatory framework of “One Bank, Two Commissions” (一行两会) that prevailed for the past five years, following the merger of the China Banking Regulatory Commission (CBRC) and the China Insurance Regulatory Commission (CIRC) in 2018.
That framework consisted of the People’s Bank of China (PBOC) – the Chinese central bank, alongside the two commissions of CBIRC and the China Securities Regulatory Commission (CSRC).
The new framework approved by the Chinese congressional meetings in March of this year instead consists of the “One Committee, One Bank, One Administration and One Commission,” (一委一行一局一会) – in reference to the Central Financial Work Committee (中央金融工委), PBOC, SAFR and CSRC.
SAFR, the new financial super-regulator, is established on the foundations of CBIRC as its predecessor, and is responsible for “unified supervision and regulation of the financial sector with the exception of the securities sector; strengthening systems regulation, conduct regulation, functional regulation and over-arching regulation; and assuming comprehensive responsibility for the protection of the rights and interests of financial consumers.”
SAFR is also responsible for “strengthening risk prevention and management and prevention and disposal, and lawfully investigating conduct in breach of laws and regulations.”
Domestic analysts say the overhaul to China’s financial regulatory framework is intended to create a “twin peaks” model that will separate responsibility for the supervision of systemic risk and stability from regulation of conduct and the protection of consumer rights.
The overhaul will also deepen reforms of the regional financial regulatory system, in order to better manage the relationship between local governments and local financial systems with regard to burdensome debt levels.
Li Yunze becomes China’s first Gen-X ministerial official
The creation of SAFR has seen the appointment of China’s first ministerial-level official born after 1970 as its head, to effectively replace Guo Shuqing (郭树清), formerly the head of CBIRC, as the top financial sector regulatory chief.
On 10 May, 52-year Li Yunze was officially appointed to the position of party committee secretary of SAFR.
Li is a near three-decade veteran of China’s banking and financial system, who has directly participated in landmark developments in the reform process since the turn of the century.
He spent 23 years of his career with big state-owned lender China Construction Bank (CCB), as well as a brief stint more recently with Industrial and Commercial Bank of China (ICBC) – the world’s biggest lender in terms of assets.
Li first joined CCB in 1993 after graduating from Tianjin University, joining the big state-owned bank’s Heping sub-branch in Tianjin municipality.
Just a decade later at the age of 33, Li was promoted to the position of assistant president of CCB’s Tianjin branch, marking his ascent to the regional leadership team.
As a CCB executive, Li was present at key events in the reform of China’s state-owned banking sector during the Hu-Wen era.
Chief amongst them was the listing of CCB and the introduction of foreign investment into the big state-owned lender from a bulge bracket Wall Street bank.
In June 2005, CCB entered a subscription agreement with Bank of America for the sale of a 9% equity stake for USD$3 billion, becoming the first state-owned bank in China to introduce a foreign strategic investor. Four months later, it also became the first big state-owned bank to launch on the capital market.
Li reportedly assisted in the restructuring of CCB, subsequently rising to the role of vice president of the Tianjin branch.
In July 2016, Li departed from CCB after 23 years, transferring to ICBC to serve as vice president and member of its party committee. Li’s move to ICBC marked the first time that he had joined the leadership team of a bank head office. Li was reportedly responsible for operations including personal finance and private banking during his stint at ICBC.
Li’s time at ICBC would be comparatively brief. In 2018, the Chinese central government appointed a number of leading mid-career executives from China’s financial sector to top positions in the provincial political system as deputy governors.
The goal of creating this cohort of “finance deputy governors” was to help drive economic and financial reform at the local level, improve the regional fiscal system and help to drive the development of the financial sector.
Li was one of these executives, assuming the role of deputy governor and party committee member for the vast inland province of Sichuan in September 2018.
During his time in Sichuan province, Li was responsible for foreign affairs, development and reform, finance and taxation, as well as statistics and auditing work.
He also oversaw the establishment of the Bank of Sichuan in November 2020 – a province-level corporate bank created from a merger of Panzhihua Commercial Bank and Liangshan Prefecture Commercial Bank, whose creation was the culmination of a decade-long process.
In May 2021, Li Yunze was appointed to the Standing Committee of the Sichuan Provincial Party Committee, becoming the youngest member of a provincial party standing committee.
In October 2022, Li Yunze was appointed as an alternate member of the 20th Central Committee of the Communist Party of China (CPC). The Central Committee is the top leadership body for the party, with Li’s appointment marking his ascent to the ranks of China’s senior-most politicians and officials.
Li’s remarks and opinions over the years
According to state-owned media reports, Li has been sparing in the expression of his views and opinions during his nearly three decades as a member of the Chinese financial sector. He nonetheless has provided some clues as to his views on the role and regulation of finance – especially in recent years following his appointment to the ICBC leadership team.
In 2017, during an appearance at the Lujiazui Forum held in Shanghai, Li said that the Chinese financial sector needed to play a role in supply-side structural reforms via its basic role as a “lending intermediary, credit intermediary and information intermediary.”
Li also highlighted the role of fintech and big data in improving the efficiency of Chinese finance. At the Lujiazui Forum, Li pointed out that “financial institutions, especially large state-owned banks, have accumulated a large amount of data, and should further increase the application and collection of big data.
“[They should] integrate online and offline information, break down the transaction barriers between enterprises and customers, unblock the channels for resource allocation, and accelerate resource circulation efficiency.”
In January 2018, Li published an essay entitled “Launching a New Era of Smart Retail Finance” (开启智慧零售金融新时代) in his role as ICBC vice-president.
In the essay, Li highlighted both the great potential and perils of Internet-driven fintech.
“Faced with a new era for a wave of reform and the wild development of Internet finance, while affirming the positive aspects we should also see the potential for disorderly competition and risk accumulation in the background,” Li wrote.
“We must both focus on and respond to the shocks brought by retail finance participants in the new era, as well as open up vast new space for cooperation.”
In March 2018 at the 7th Lingnan Forum, Li highlighted the need for firm regulation of the finance sector, with an especial focus on China’s flourishing parvenu fintech players.
“The essence of fintech is still finance, and risks must be effectively prevented, including protecting the interests of depositors and reducing account risks,” Li said.
“The vigorous development of fintech in China can enable a small institution to accumulate a large amount of funds in a brief period of time. If controls are poor, it is easy to induce systemic risks. This is still finance, and thus must be regulated.”