On May 27, 2024, Xi Jinping, General Secretary of the Communist Party of China (CPC) Central Committee, led a pivotal meeting of the Political Bureau of the CPC Central Committee. According to Xinhua News Agency, the meeting focused on trial provisions for accountability in preventing and mitigating financial risks. This initiative signals China’s strong commitment to intensifying efforts to manage major financial risks, in line with its rapid strides towards high-quality development and its ambition to become a global financial powerhouse, experts have observed.
Following a series of recent measures aimed at addressing financial risks, the trial provisions for accountability are expected to further enhance institutional mechanisms to better prevent and resolve risks. These provisions are crucial for promoting the sound, high-quality development of the financial market, which plays an essential role in the overall economy, according to experts.
The meeting underscored that preventing and mitigating financial risks is intertwined with national security, overall development, and the protection of people’s property. These issues are fundamental hurdles that must be surmounted to achieve high-quality development. The trial provisions for accountability aim to encourage officials at all levels to adopt a correct perspective on performance and effectively carry out tasks related to strengthening financial supervision, preventing and managing financial risks, and promoting high-quality financial development. The meeting emphasized strict adherence to the trial provisions.
This meeting reflects the Chinese leadership’s sustained focus on addressing financial risks and fostering high-quality development in the financial industry, experts noted. “Tackling financial risks has become a top priority for the CPC Central Committee, and addressing loopholes and weak links is a continuous effort,” stated Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, in an interview with the Global Times.
Dong highlighted that since the latter half of 2023, the stock market faced significant downside risks, accompanied by major risks in related areas such as financial markets, the property sector, and local government debt, necessitating enhanced regulation. “Strengthened provisions on accountability are imperative to address weak links in our country’s financial regulatory system,” Dong asserted.
The May 27 meeting follows an earlier CPC Central Committee Political Bureau meeting held on April 30, which also focused on the ongoing prevention and resolution of risks in critical areas. During that meeting, there was a call for policy research aimed at reducing housing inventory and enhancing the quality of newly-added housing. Furthermore, the meeting emphasized the thorough implementation of plans for local governments to manage debt risks, ensuring that areas with high debt levels not only effectively reduce their debt burden but also maintain stable development.
The central financial work conference in October 2023 set the tone by emphasizing comprehensive strengthening of financial supervision, improving the financial system, optimizing financial services, and preventing and resolving risks. This was further reinforced in the Government Work Report in March, which called for greater efforts to effectively prevent and manage risks in key areas.
Xi Jinping has consistently emphasized the importance of the financial industry. At the opening ceremony of a study session on promoting high-quality financial development in January, Xi noted that China’s path for financial development, characterized by its distinctive national conditions, differs fundamentally from Western financial models. “We should have more confidence and continue to explore and improve our work in the financial sector, ensuring that this path will become wider and wider,” Xi remarked, stressing that risk prevention and control must remain a constant theme of financial work, according to Xinhua.
With the top leadership focused on transforming China into a global financial powerhouse, further policy measures and reforms are anticipated, experts observed. The third plenary session of the 20th CPC Central Committee, expected in July, is likely to prioritize issues concerning the comprehensive deepening of reform and advancing Chinese modernization, with a focus on preventing and resolving financial risks and deepening financial reforms.
Cao Yuanzheng, chief economist at Bank of China International, commented that the trial provisions on accountability are part of broader efforts to tackle financial risks and promote sound development, as outlined by the central financial work conference. “Over the past four decades of reform and opening-up, China’s financial industry has made great achievements. However, we must also recognize the importance of preventing and resolving financial risks,” Cao told the Global Times. He noted that the trial provisions on accountability further improve the overall regulatory system, which is crucial in preventing systemic financial risks.
Experts believe that with continuous efforts by the top leadership and robust economic fundamentals, China’s financial industry has significant potential to become a global leader. “The real economy is very dynamic, providing a solid foundation for high-quality development in the financial industry,” Dong said. He emphasized that a top priority for China’s financial work is ensuring that the financial industry serves the development of the real economy.
China has already established a massive financial industry, with over 4,000 banking institutions and five lenders assessed as globally systemically important banks. As of the end of 2023, total assets of financial institutions in China rose to 461.09 trillion yuan ($64.97 trillion), up 9.9 percent year-on-year, according to official data.
In addition to efforts to prevent and manage financial risks and promote high-quality development, China is steadily opening up its financial markets to foreign businesses. The central financial work conference in October 2023 also called for efforts to promote high-level financial opening-up. Specifically, the meeting urged the steady expansion of institutional opening-up in the financial sector, improvements in cross-border investment and financing facilitation, and attracting more foreign financial institutions and long-term capital to expand and conduct business in China.
As China continues to navigate its path towards becoming a global financial powerhouse, the emphasis on financial risk management and high-quality development will remain central to its strategy. With robust policy measures, strengthened accountability, and continuous reforms, China aims to build a resilient and dynamic financial system that supports its broader economic objectives.
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