Security the key for financial regulators charting reform course at Beijing conference

Stability and curtailing financial risk seen as priority for Xi Jinping ahead of top consolidation of power later this year

PUBLISHED : Saturday, 15 July, 2017, 7:01am
UPDATED : Saturday, 15 July, 2017, 4:06pm

Financial security was expected to top the agenda as regulators began meeting on Friday to map out a road to regulatory reform at a crucial national conference.

The National Financial Work Conference, which has been held every five years since the 1997 Asian Financial Crisis, is expected to end on Saturday, with observers cautious about outcomes from the gathering.

Policymakers have been considering ways to better contain risks as the stock market still struggles to recover from its catastrophic crash two years ago.

Curtailing financial risk has been a priority for President Xi Jinping, and economists expected no big surprises would come out of the meeting, given stability was essential ahead of the 19th Communist Party national congress in autumn.

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“We don’t expect the financial work conference to announce any big changes to the existing regulatory agencies, but do expect some form of coordinating mechanism to be established,” said Wang Tao, chief China economist at UBS.

“We believe that establishing a more cohesive set of regulations governing various financial products and services is more important than institutional reshuffles, which could be time-consuming and counterproductive without cohesive rules.”

Analysts said they expected the conference to follow the tone set by Xi at the end of April, highlighting financial security and the financial regulatory storm launched earlier this year to clean up unregulated financing activities in the shadow banking sector.

Zhao Xijun, an economics professor at Renmin University, said: “All discussions, such as regulatory reform, market development, financial innovation and market opening up, should centre on ensuring financial security and curbing financial risks.”

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Zhao suggested that preventing risks in financial innovation, such as internet financing, from endangering social stability could be a topic for the conference.

“Reforms should not bring about new risks or conflicts. Pragmatism will dominate, utilising existing resources and ensuring that the cost of change is tolerable,” Zhao said.

Economists said they expected a policy coordination body would be introduced to reduce regulatory loopholes while the present system – the People’s Bank of China and three regulatory bodies governing banks, securities firms and insurers – would remain largely unchanged.

The conference was originally scheduled for the start of the year and the delay might indicate that the top decision makers were “in no rush to hold the meeting until a consensus was reached on reform directions”, Bank of America Merrill Lynch said in a research note.

The conference was also likely to discuss better supervision of shadow banking products, reducing regulatory loopholes and developing capital markets to control corporate leverage and support economic growth, it said.