China’s top trade war negotiator handed more control at home as Beijing expands reach of finance committee

The Financial Stability and Development Committee, under Vice-Premier Liu He, will be upgraded into a de facto governing body with local branches

China was rocked by three bank failures last year, while the phase one trade deal with the US is set to include chapters about opening up China’s financial services market

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China's Vice Premier Liu He is set to sign the phase one trade deal with US President Donald Trump on Wednesday in Washington. Photo: AFP

Published: 2:15pm, 15 Jan 2020Updated: 4:09pm, 17 Feb 2020

Vice-Premier Liu He has been given increasing power and control over China’s financial industry, with the remit of the finance committee under his purview greatly upgraded to become a de facto full governing institution with local branches.

The Financial Stability and Development Committee, which was launched two years ago as a coordinating body, will set up a “regional coordination mechanism” at provincial branches of the People’s Bank of China (PBOC), according to a statement released by the central bank.

Under the new arrangements, the central bank’s provincial chiefs will be entitled to convene meetings with banking, insurance, securities and foreign exchange regulators as well as local economic planners, financial service and fiscal departments, to discuss matters concerning regional financial stability.

“It aims to strengthen the coordination between central and local governments in terms of financial regulation, risk disposal, information sharing and consumer protection,” said a statement regarding the changes to the committee, which includes members from China’s central bank, the banking regulator as well as the securities market watchdog.

It aims to strengthen the coordination between central and local governments in terms of financial regulation, risk disposal, information sharing and consumer protection

PBOC statement

The announcement, which came at a time when Beijing is remaining vigilant about the country’s fiscal and financial risks, was made while Liu was in Washington to sign the phase one trade deal with the United States, which is expected to include chapters about opening up China’s financial services market.

Last year, China’s banking industry was shocked by a several high-profile bank failures, including the government seizure of Baoshang Bank, the bailout of the Bank of Jinzhou and the recapitalisation of Hengfeng Bank. Two bank runs were also reported at small lenders – Yichuan Rural Commercial Bank and Yingkou Coastal Bank – in the fourth quarter of 2019 that further shook public confidence.