China must control financial risk as its markets open wider, regulatory body says

‘We must clean up all the financial mess and have zero tolerance for irregularities,’ agency chaired by Vice-Premier Liu He says

Reform of large state-owned banks among targets outlined at meeting of Financial Stability and Development Committee

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China says it is committed to the further opening up its financial markets. Photo: Xinhua

Published: 5:44pm, 1 Nov 2020Updated: 10:43pm, 1 Nov 2020

China must safeguard against financial risk as it prepares to open its markets wider to private and foreign investors, a regulatory body chaired by the country’s top economic adviser said on Saturday.

“We must clean up all the financial mess and have zero tolerance for irregularities,” the Financial Stability and Development Committee (FSDC) said in a statement released online.

“Our bottom line of no systemic financial risks must be defended,” said the agency, which is headed by Vice-Premier Liu He.

The world’s second-largest economy has been tackling a host of financial challenges in recent years – from eradicating unscrupulous peer-to-peer lending platforms to reducing debt levels and shoring up small- and medium-sized banks – and is nearing the end of its three-year “de-risking” agenda to stabilise markets, while also protecting the environment and eradicating poverty.

The committee’s comments come after China’s leaders last week released their key development principles for the 2021-25 five-year plan period and the decade beyond. These call for a balance between development and financial security, as well as vigilance against external destabilising forces such as the possibility of a decoupling from the United States.

There will also be a “higher-level opening” of China’s markets, according to the communique issued after the Communist Party’s latest plenary session, which will create new challenges for the state-controlled financial system and test the government’s ability to manage the flow of so-called hot money into the country.

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