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Li Yunze was appointed as the party chief of the new National Financial Regulatory Administration (NFRA) last week. Photo: Sina.cn

China’s financial regulator vows to cut ‘blind spots’ and ‘build an iron wall’ as new body takes shape

  • Vice-Premier He Lifeng oversaw the inauguration ceremony of China’s new regulator, the National Financial Regulatory Administration (NFRA), on Thursday in Beijing
  • Li Yunze was appointed as the party chief of the new body, which was set up earlier this year to prioritise financial stability, last week

China’s new regulator will strive to oversee all types of financial activities and will seek to eliminate regulatory “blind spots” and “build up an iron wall of financial security”, its newly appointed party chief said at the body’s inauguration ceremony on Thursday.

Li Yunze was appointed as the party chief of the new National Financial Regulatory Administration (NFRA) last week after the body was set up as part of a sweeping reform plan unveiled at the annual ‘two sessions’ in March amid its shift to prioritise financial stability.

Vice-Premier He Lifeng oversaw the inauguration ceremony, which was also attended by central bank governor Yi Gang.

We’ll also transform our functions and improve [regulatory] efficiency
Li Yunze

“We’ll do our best to fully implement the three key tasks, including serving the real economy, preventing financial risks and deepening financial reforms,” Li said during the ceremony on Beijing’s Financial Street, according to the China Banking and Insurance News, a newspaper affiliated with the regulator.

“We’ll also transform our functions and improve [regulatory] efficiency,” he added, mulling new regulatory rules to support high-quality economic development.

The focus of Li’s speech also suggested that de-risking, a landmark policy implemented in the past five years that has been weighing on the financial sector, will remain high on the agenda of China’s top leadership over the next five years.

Previously, some of the fast deleveraging work has scaled back in the property sector as a majority of private developers fell into a debt crisis, raising concerns about the risk of de-risking.

It’s an important step in China’s reform of its financial regulatory regime
Xinhua News Agency
Amid concerns over curbing risks from growing piles of local governments debt, as well as weaker financial institutions, the US banking crisis and a possible risk exposure to the country’s uneven economic recovery, Beijing set up the new body as part of a sweeping reform plan unveiled at the annual “two sessions” in March.

The US debt ceiling crisis and ongoing property woos in China are also set to add to the burden of the new body.

The NFRA will incorporate the China Banking and Insurance Regulatory Commission and absorb the central bank’s supervisory body for financial holding companies and the securities regulator’s investor protection function, according to a draft plan submitted to the National People’s Congress – China’s top legislature – earlier this year.

“It’s an important step in China’s reform of its financial regulatory regime,” the official Xinhua News Agency said on Thursday after the ceremony.

“It’s significant for the endeavours to improve modern financial insight and tackle stubborn contradictions or problems in the finance sector.”

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Ding Xuedong, Wang Jiang, Yi Huiman also attended the inauguration ceremony.

Ding is a deputy secretary general of the State Council and former chairman of China’s sovereign wealth fund, China Investment Corporation, and leading investment bank, China International Capital Corporation.

Wang recently resigned as chairman of state-owned China Everbright Group, while Yi is the chairman of the China Securities Regulatory Commission.

According to the government-backed Beijing Business Today, Wang was introduced at the ceremony as the executive deputy director of the Office of the Central Finance Commission, which will be set up under the party’s top decision-making body, the Central Commission, to strengthen its control over bureaucratic policymaking.

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The Central Finance Commission is expected to be chaired by President Xi Jinping, while Vice-Premier He Lifeng could head its office to run its daily operations.

The world’s second-largest economy is expected to convene a tone-setting national finance work conference later this year. The first conference was convened in 1997 to handle the Asian financial crisis and was held once every five years until 2022.

China is the world’s second-largest capital market that has attracted many Wall Street banks and overseas mutual funds.

Financial institutions, largely controlled by the Chinese government, held 419 trillion yuan (US$60 trillion) of assets by the end of 2022, including 379 trillion yuan of banking assets, 27 trillion yuan in the insurance sector and 13 trillion yuan in the securities sector, government data showed.

Overseas investors hold around 4 per cent of China’s A-share capitalisation and 3.3 per cent of its interbank bond market.

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