Key Chinese leadership financial conference ‘postponed’

The national financial work conference, a secretive but crucial leadership policy meeting held only every five years, appears to have been postponed. Analysts say it reflects lack of consensus among leaders over key reforms

PUBLISHED : Wednesday, 03 August, 2016, 4:14pm
UPDATED : Wednesday, 03 August, 2016, 10:43pm

China may have postponed a top financial conference, according to information buried in a governmental agency notice, reflecting difficulties within the top leadership in building consensus on how to overhaul the country’s financial system.

The national financial work conference, a key policymaking meeting held every five years, will convene no earlier than late September, later than expected. The news came to light after the international cooperation agency of the National Development and Reform Commission (NDRC), China’s top planning authority, published a notice about a separate academic meeting in September 24-26.

In the notice, the agency, which takes care of international affairs for the NDRC, noted that discussions from the academic meeting would be in line with the theme of the national financial work conference, without specifying the actual date.

The obscure notice sheds rare light on one of the most important meetings to be held under the leadership of President Xi Jinping and Premier Li Keqiang.

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While the national financial work meetings are widely watched as their decisions set the course for China’s financial regulatory system and the financial industry, the dates, venues and agendas are guarded in secrecy.

China has only held four such meetings in the past, with first convened in 1997 when Beijing decided to bail out state banks.

The second meeting, in 2002, pushed state banks to make initial public offerings and create the national banking regulator. In 2007, the third work conference decided to develop an onshore bond market and create China’s sovereign wealth fund.

The most recent meeting, in 2012, didn’t produce new major policy moves partly because of the transition of power from the “fourth generation” leadership of president Hu Jintao and premier Wen Jiabao to Xi and Li.

The fifth national financial work conference was originally scheduled for January, 2017, but the leadership decided to bring the meeting ahead to last month, Bloomberg reported earlier, following last year’s stock market rout and systemic risks of the growing shadow banking system.

While recognising the existence of the problems was easy, agreeing on a solution has proven more difficult.

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Zhou Hao, senior emerging markets economist for Asia at Commerzbank, said there is no ideal plan to please all sides even though they see the problem.

“It’s not only about overcoming vested interests,” Zhou said. “Every proposal has pros and cons. That’s probably why policymakers can’t make a decision.”

One of the meeting’s main themes is expected to be the overhaul of China’s financial regulatory system.

Currently, the watchdogs – the China Securities Regulatory Commission, the China Banking Regulatory Commission and the China Insurance Regulatory Commission – operate independently while the boundaries of actual financial activity have become increasingly blurred. At the same time, the People’s Bank of China, the central bank, has remained relatively aloof.

An industry observer who declined to be named said on Wednesday that a real merger of the regulators into a more encompassing body would be unlikely.

Zhang Chenghui, head of the financial research institute at the NDRC’s Development Research Centre, said in June that there were three reform scenarios. First, the top three financial regulators could become bureaus under the PBOC. Second, the banking regulator could merge with the PBOC, while the securities and insurance watchdogs maintain their independence. Finally, the three regulators could be combined into a single agency that ran parallel with the PBOC.

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But Zhang noted that all the three options could fall short because the finance ministry, another key player in China’s financial industry, was not included in any of the three possible reform options.

Li Yang, a former vice president of the Chinese Academy of Social Sciences and a senior government adviser on financial affairs, said in June that internal disagreement within the leadership and the agencies was “very big”, making it very hard to reach consensus.

“Given the importance of the meeting, every ministry and government agency was is trying to instil their own agenda into the meeting,” Li was quoted by Sina.com as saying then.