Chinese president warns Politburo to be on guard against financial risks
Chinese President Xi Jinping ramped up the rhetoric about financial risks on Tuesday, making a rare repeated call for the authorities to keep a lid on the threats.
Xi told a meeting of the Communist Party’s Politburo that China faced challenges overhauling its economy but the authorities should ensure there were no systemic financial risks, Xinhua reported, citing a statement.
The government should attach great importance to preventing and controlling financial risks and improving coordination between the various regulatory authorities, the statement said.
It is rare for “financial risks” to be mentioned twice in a single official document from such kinds of meetings, but the warnings are in line with the party’s risk aversion agenda ahead of a major reshuffle later this year.
The statement added that the government should step up punishment of illegal activities in the industry and do more to ensure the financial sector could help the industrial economy.
Liao Qun, chief economist at China Citic Bank International, said he was not surprised by the official line.
“This simply shows the severity of tightening financial regulation in recent months,” Liao said.
A chill wind has swept through China’s banks, stock markets and insurance companies this year, as top regulators in the financial sector have cracked down on violations of regulatory rules and officials abusing their power for personal benefit.
In some cases, watchdog cadres have been targeted.
Former China Insurance Regulatory Commission chairman Xiang Junbo was put under investigation for violating party discipline earlier this month. Xiang, who had extensive ties in banking and insurance, is one of the highest-ranking cadres to fall in the financial industry.
According to a report from Chinese financial media outlet Caixin, Guo Shuqing, chairman of the China Banking Regulatory Commission, told a meeting last week that he would step down if the banking sector became a mess on his watch.
“We need to seriously chastise individuals and institutions for their wrongdoings, ” Guo was quoted as saying. “For those with severe violations, we need to penalise them heavily to warn others.”
The Politburo meeting came a few days after China reported GDP growth of 6.9 per cent for the first three months of the year. That rate was faster than last year’s average of 6.7 per cent and well above the 6.5 per cent target for this year.
But the growth rebound was largely due to debt-fuelled spending led by the government.
Meanwhile, many Chinese companies are turning to shadow banking for financing as Beijing gradually tightens checks on direct-funding channels like bank loans and bonds, creating extra risks for regulators.
Now that regulation is on the government’s radar, economists are wondering whether the Chinese leadership will still be committed to long-term restructuring plans such as reform of state-owned enterprises.
“The current improvement of China’s economy is partly cyclical,” the Xinhua statement said. “Restructuring the Chinese economy is still a long shot with plenty of challenges ahead.”