Xi Jinping

Xi Jinping's security commission to also tackle financial industry

Fears speculative foreign capital could threaten domestic stability one reason for top-level division within new National Security Commission

PUBLISHED : Tuesday, 28 January, 2014, 4:30am
UPDATED : Tuesday, 28 January, 2014, 8:57am

Beijing will create a ministerial-level division dedicated to financial industry security within the new National Security Commission to be chaired by President Xi Jinping.

The move comes as the world's number two economy is increasingly worried about speculative capital flows that may threaten domestic stability.

Xi's vision of the NSC was expected to focus on "all kinds of emerging and new threats that the government hasn't spent too much time and resources on yet", a source said.

Financial industry security would fall into the "emerging threat" category.

"We do have several different departments to tackle financial security matters. For example, the State Administration of Foreign Exchange has been monitoring 'hot money' closely, and the Ministry of State Security has a team of experts to deal with related problems," said a government source familiar with the situation. "But if we compare our efforts with some big Western countries, our leaders believe we still have a lot more to do with financial security, which is proving to be a serious threat not just to China but also to other countries amid the growing trend for economic globalisation."

Shi Yinhong , an international relations professor at Renmin University, said representatives from the financial sector would be included in the NSC.

"Everything related to security of the nation will be the job of the committee, and this includes the financial aspect," Shi said.

Premier Li Keqiang , who is mainly responsible for economic and financial affairs, is commission vice-president.

A minister-level position of "financial security commissioner" has also been created and will be filled by an official with experience in the financial industry.

The source cited two examples of how financial security could affect domestic social stability. One involved unusual price moves on the stock market.

Some government agencies had been collecting evidence and data in recent years to prove how speculative foreign capital - "hot money" - moved through the underground banking system, rocking the stock market and affecting local investors' confidence in the mainland's economic development.

Another case involved the virtual currency bitcoin, in which the mainland's central bank has already banned domestic financial institutions from trading.

Beijing is also worried the tapering off of the US Federal Reserve's bond-buying programme may add pressure to monitor and control the pace of capital outflow.