China’s central bank says it will prioritise financial stability this year, vowing to strengthen its regulatory muscle and to put all financial activities under government supervision, in an effort to eliminate risks.
In particular, the People’s Bank of China (PBOC) said it will firmly implement the top leadership’s plans to strengthen antitrust enforcement and prevent the “disorderly expansion of capital”, which generally refers to the regulation of China’s big technology companies.
“Measures will be taken to enhance prudential supervision over the financial activities of online platforms,” the PBOC said in a statement published on its website on Wednesday.
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In November, financial regulators finished closing all of the more than 10,000 peer-to-peer (P2P) lending platforms that had sprung up nationwide in the past 14 years and attracted millions of private investors, leading to billions of yuan worth of savings being lost.
And late last month, the central bank summoned Ant Group, whose dual listings in Shanghai and Hong Kong had already been suspended two months earlier, and ordered it to immediately rectify financial regulatory violations, including those in its credit, insurance and wealth-management-product businesses, and to ensure the protection of personal information during its credit ratings of clients.
Ant Group is a sister company of Alibaba Group, which owns the South China Morning Post.
“Financial innovation must be based on the condition of prudential supervision,” the central bank said after its annual conference, following the tone set for this year’s policies at the central economic work conference last month.
“Excessive marketing of financial products, and luring people into over-indebtedness, will be prohibited, while violations of financial consumers’ legitimate rights must be punished,” Wednesday’s PBOC statement said.
The comments are the latest example of how Beijing’s increasing focus on financial security is reshaping the world’s second-largest economy and second-largest capital market.
As shown in the document released in late October after the Fifth Plenum of the Chinese Communist Party, the nation’s top leadership has put domestic security on a par with economic development.
In addition to the all-out efforts to reduce risks, the government’s new dual-circulation development strategy will rely on domestic demand to power future growth as a countermeasure against external threats, with a goal of increasing domestic supplies of key products, technologies and foodstuffs over the next 15 years.
The PBOC is one of the central regulatory agencies – along with the China Securities Regulatory Commission and the China Banking and Insurance Regulatory Commission – under the Financial Stability and Development Commission headed by Vice-Premier Liu He, the top economic adviser of President Xi Jinping.
The PBOC said its campaign to reduce financial risk – including cleaning up shadow banking and P2P lending platforms over the last three years; seizing regional lender Baoshang Bank in 2019; and taking over Tomorrow Group’s nine financial institutions last year – had “effectively” curbed the rise in risks to the nation’s financial system, as well as the blind expansion of the financial sector.
This year, the central bank has said will strengthen the monitoring and evaluation of systemic financial risks, while enhancing the supervision of financial holding companies.
All major financial activities, institutions, financial markets and financial infrastructures will be included in its quarterly macroprudential assessments of the financial system – a key element of maintaining financial stability in parallel with monetary policy, the PBOC said in its statement.
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