China banking on home-grown system to keep financial crises at bay
Macro prudential assessment system created after the 2008 global financial crisis, which conventional monetary policy frameworks failed to prevent
The People’s Bank of China is pinning its hopes of fending off a financial crisis on a home-grown macro risk assessment system, according to the youngest of China’s five central bank deputy governors.
The “macro prudential assessment” (MPA) system is the result of Beijing’s efforts to learn from the 2008 global financial crisis after conventional monetary policy frameworks failed to prevent it.
Speaking at the annual Caixin conference on Thursday, 47-year-old Yin Yong, who holds a Master of Public Administration from Harvard University, said the reason traditional regulatory systems failed was because they were “limited and fragmented”.
In contrast, “China’s MPA framework is designed to prevent systematic risks,” he said, adding that it was “set to enhance the stability of the financial system and control excess prosperity”.
The central bank is struggling to pursue the sometimes conflicting objectives of maintaining growth and controlling borrowing. After the yield of China’s 10-year government bonds exceeded 4 per cent earlier this week, a sign of stress in the money market, the PBOC is pumping 810 billion yuan into the market, the largest weekly liquidity support since January, Reuters reported.