View of the People's Bank of China in Beijing. Photo: AFP/Wang Zhao
View of the People's Bank of China in Beijing. Photo: AFP/Wang Zhao

The announcement over the weekend of a new cabinet-level regulatory committee, administered under the auspices of China’s central bank, has been welcomed as a positive development, pending further details.

Chinese financial news outlet Caixin asks, what does the market want to know?:

“The Saturday announcement is a high-level mandate that shows the government is committed to financial stability, curtailing risks and curbing reckless borrowing.

But at the end of the day, the market needs more details on how the policy will be executed. For instance, what does it mean by having local officials held accountable for life for bad decisions on debt management? How exactly will various regulators to be coordinated?

Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin Insight Group, said regulations are set to be tighter. The impact on market participants could be more pronounced if the economy is weak.”

Director of the People’s Bank of China Financial Stability Bureau, Lu Lei, revealed in an interview with the People’s Daily only vague aspects of the new office, saying that the committee’s primary aim is to coordinate financial sector reform and supervision and has a mandate to be involved in formulating monetary, fiscal and industrial policies.

In response to the announcement of the new committee, the China Banking Regulatory Commission and China Insurance Regulatory Commission (CIRC) both issued statements that they will cooperate with the new office. CRIC, which has been criticized for the sale of high-risk “wealth management products”, pledged a “return to its roots” of providing long-term and stable risk management.