China is grappling with the financial regulation system. To oversee the cross-market business of inflated financial groups by making professional and effective decisions, a more complex set-up is emerging, which underlines the strong role of the central bank.
The change was noted by Xu Zhong, head of the research institution of the People’s Bank of China, the central bank, who has published numerous research papers on the subject. According to the expert, the country’s plan to rebuild the financial regulatory system is forthcoming. Indeed, there are too many to criticize the current financial system, which leaves too many loopholes for financial instability.
The ideal financial regulatory framework for Xu Zhong is similar to a “matrix”: on the vertical line from top to bottom, with the cabinet of Financial Stability and Development Committee at the top; and horizontally, with several specialized committees that may be launched.
The central bank official said that the current system led to unexpected market expectation during the stock market turbulence in August 2015. Xu Zhong said: “”In the current situation with highly frequent financial chaos, the central bank’s role to lead the regulatory work, beyond just being a coordinator, should be further strengthened”.
To see results, however, we will have to wait for the end of the Lunar Year celebrations. Huang Yiping, a member of the central bank’s monetary policy committee, said that more policies could be released around the “two sessions”－the annual sessions of the National People’s Congress and National Committee of the Chinese People’s Political Consultative Conference starting on March 3. According to the experts, a final version of the more strict regulations on wealth management products, could be released even before the “two sessions”.
Zhao Yang, an economist from Nomura Securities, said that the theme will remain in 2018: “We continue to believe that deleveraging will likely be a multi-year process”. So begins a period for China of greater financial stability.