Central bank wants China's capital markets to play "core role" in resource allocation.

"Patient capital" drives the rise of Shanghai's humanoid robots.

Our briefing on critical economic and financial developments in China as of Tuesday, 20 May 2025:

• The Chinese central bank's chief researcher unveils a fresh blueprint for further financial reform. The goals include making capital markets the "core" of financial resource allocation, and elevating China to the status of a great financial power.

• The rise of Shanghai's humanoid robots powered by Communist party's push for "patient capital." The Shanghai municipal government has launched multiple funds within its jurisdiction to further drive tech innovation.

• Derisking of China's struggling rural lending sector accelerates. NFRA has pushed for the acquisition or dissolution of small-scale rural lenders that struggling to deal with poor business conditions in the countryside.

• China advances its offloading of US Treasuries. A trend that began in 2022 has just culminated in China dropping to third place out of Washington's top foreign creditors.

Chinese central bank's top researcher unveils fresh blueprint for financial reform

The chief of research at China's central bank just unveiled its blueprint for financial transformation.

Beijing wants China to become a "great financial power" globally. It also wants stock and bond markets to play a central role in China's technological rise.

On 18 May, Ding Zhijie (丁志杰), the head of the Chinese central bank's research department, oversaw the release of the "China Financial Policy 2025 Report" (中国金融政策报告2025) at the Tsinghua PBCSF Global Finance Forum.

The theme of this year's report is "Continued Deepening of Financial System Reforms - Accelerating the Development of a Modern Financial System with Chinese Characteristics" (持续深化金融体制改革 加快建设中国特色现代金融体系).

Ding highlighted five recommendations from the report for advancing the ongoing reform of China’s financial system.

One - Optimising the allocation of financial resources.

This will involve elevating the role of capital markets in a financial system long dominated by the state-owned banks.

Ding said China should "establish a resource allocation system with capital markets at their core, employing the core role of capital markets in resource allocation, and strengthening the ability of finance to support economic transition."

China will continue to refine its "multi-tier capital system," driving the coordinated development of equity and bond financing, as well as supporting and entry of medium-and-long-term capital into the market.

A key focus for Beijing will be strengthening the supply of financial resources for strategic emerging industries and scientific and technological innovation.

Two - Improving China's central banking system.

According to Ding, this will entail:

• Smoothing out monetary policy transmission mechanisms.

• Deepening interest rate marketisation reforms.

• Improving the benchmark interest rate formation system.

• Raising the guidance role of policy rates.

• Raising the responsiveness of financial institutions.

• Optimising the design and incentive mechanisms for structured monetary policy tools.

• Driving the "precision irrigation" of key areas of the economy using financial resources.

Three: Consolidation of stable financial protections and strengthening regulation.

Beijing will "strengthen the coordination of macro and micro-prudential regulation, lawfully include all financial activity under the purview of supervision and regulation, and clarify the division between central and local regulatory responsibilities."

A key focus will be the reform and disposal of risk in relation to small and medium-sized banks, as well as raising their corporate governance capabilities and capital supplementation mechanisms.

Four: Firmly abiding by the essential role of finance - raising the "quality and effectiveness of financial services."

Ding said that Chinese financial institutions need to focus on their "chief responsibility and business" of servicing the real economy.

He wants the Chinese financial system to "raise its efficiency and professional ability to allocate resources, as well as strengthen internal corporate management, risk controls and auditing.”

Beijing will endeavour to prevent finance from "moving away from the real towards the empty," while also guiding the standardised implementation of fintech innovations and the acceleration of digital transformation.

Five: Vigorously driving the high-level opening of the Chinese financial sector, and accelerating the development of a great financial power.

This will involve "firmly driving renminbi internationalisation, and raising its cross-border payments, financing, investment and store of value functionality."

To this end, China will seek to:

• Strengthen connections and ties with offshore markets.

• Develop offshore renminbi products.

• Accelerate the development of international financial centres within China.

• Expand the openness and depth of China’s financial markets.

• Increase the influence of China's voice in matters of finance.

The rise of Shanghai's humanoid robots powered by "patient capital."

The explosive rise of China's humanoid robots is powered by Beijing's push for "patient capital," according to a report from the People's Daily - the flagship newspaper of the Communist Party.

Shanghai has recently emerged as a key development hub for the Chinese robotics sector.

January of this year saw Shanghai open China's first official "training site" for heterogenous humanoid robots.

The 5000-square-metre robotics training site is a collaborative undertaking between China's central and local governments, with the participation of central state-owned enterprises, private businesses and Chinese tertiary institutions.

Shanghai has also become home to some of China's leading humanoid robotics companies.

These include Fourier, which recently completed a series E funding that raised nearly 800 billion yuan - and Agibot, valued at 15 billion yuan following the participation of tech giant Tencent in its series B funding.

The People's Daily credits the rise of Shanghai's robotics industry to the city's high-end manufacturing infrastructure, as well as the sophisticated supply chains of the surrounding Yangze River Delta region.

"It's because of the maturity of upstream supply chains that we have been able to produce a humanoid robot in such a short period of time, said Zhang Shaozheng (张绍政), head of Agibot's robot manufacturing department.

The flagship newspaper of the Communist Party also gives credit, however, to the role of "patient capital" in supporting China's technological innovation.

It highlights the critical importance of "using patient capital to support original innovation."

"Since last year, central government documents have made reference on multiple occasions to the development of patient capital," wrote Shen Wenmin ( 沈文敏) in a People's Daily article entitled "The evolution of robots is now accelerating in Shanghai" (在上海,机器人正加速“进化”).

"The main goal [of patient capital] is to focus more on long-term projects and investment activities, instead of pursuing short-term profits as the main target," Shen writes.

"[This is] capital with a much higher degree of risk tolerance."

Shen highlights the critical role that "patient capital" plays in emerging hi-tech industries where the outcomes are speculative and uncertain.

"Every innovation means burning cash," said Wang Bing (汪兵), head of the Shanghai Humanoid Robotics Innovation Incubator (上海人形机器人创新孵化器).

"China's indigenous innovation isn't accidental - it's the product of patient accumulation leading to success.

"We need patient capital and long-term capital to support original innovation, and paradigm-changing innovation."

According to Shen, this is the reason that Shanghai's municipal government has established a humanoid robotics industry fund worth tens of billions of yuan to provide investment support.

Shanghai's subordinate authorities have also established their own industry guidance funds targeting the robotics sector.

These include Shanghai's Pudong New District, which has established its own humanoid robotics fund, as well as the Baoshan district, with its 500 billion yuan Shanghai Shoubao Zhiye Investment Fund (上海首宝智业投资基金).

This year, Shanghai's Humanoid Robotics Innovation Centre (人形机器人创新中心) will also establish a 200 billion yuan fund that focuses on humanoid robot vertical industries, with the support of the municipal science and technology committee.

Derisking of China's struggling rural banking sector accelerates

China is rushing to defuse the financial risk created by the struggles of its small rural lenders.