China's finance sector gets an overhaul with a new regulator
For years, three different regulatory bodies have overseen China's financial system.
A few minutes every morning is all you need.
Stay up to date on the world's Headlines and Human Stories. It's fun, it's factual, it's fluff-free.
The backstory: For years, three different regulatory bodies have overseen China's financial system – the People's Bank of China (PBOC), the China Banking and Insurance Regulatory Commission (CBIRC) and the China Securities Regulatory Commission (CSRC). But there are worries about overlapping responsibilities and what's known as regulatory arbitrage, which is basically when companies use loopholes to avoid following the rules.
More recently: In 2018, President Xi Jinping merged China's banking and insurance regulators. Then, last year, Xi stressed the need for
deepening financial reforms to strengthen the CCP's unified leadership over financial work. And last week, he called for even more reforms to party and state institutions.
The development: Now, China is taking steps to make sure its economy and financial systems are safe from any potential risks by creating a new national regulator called the National Financial Regulatory Administration that will oversee all financial sectors (except for securities). The new regulator will bring together existing banking and insurance watchdogs. Also, some of the central bank's responsibilities will be moved to this new entity.
So, the CBIRC will be phased out and restructured into a new agency that also absorbs some functions of the PBOC and the CSRC and reports directly to the State Council.
While not everyone is convinced that the new "super regulatory administration" will be effective, some experts see it as a positive step towards better oversight and more centralized power. The reform plan is set to be voted on by the legislature on Friday.
Key comments:
"The purpose of the new regulatory body is to make sure that it encompasses some of the blind spots in regulating illicit practices in finance, and under one umbrella to make sure that there's no room for shrugging off responsibilities," said You Lanqiang, a fund manager at Pingtan Strategic Asset Management Co.
"You could certainly argue for better coordination between regulators but a whole new super regulatory administration may not be the solution," said Fraser Howie, who has written several books on China's financial system.
"Now all of those regulatory functions are with the new bureau, which is basically CBIRC with some regulatory role taken back from PBOC and CSRC, which makes perfect sense," said Li Nan, a professor of finance at Shanghai Jiaotong University.
Comments ()