China should deepen supply-side reform in the financial sector and strengthen the sector’s role in the economy and its ability to serve the real economy, said Chinese President Xi Jinping in a study session of of the CPC Central Committee Political Bureau on Friday.
Xi stressed that finance is a core aspect of a country’s competitiveness, financial security is an important part of national security, and the financial system is a major part of China’s economic and social development, according to the state-run Xinhua News Agency.
He urged enhancing the global competitiveness of China’s financial sector, elevating two-way opening-up to a higher level, and beefing up capabilities of financial management, and risk prevention and control amid greater opening-up.
Xi’s remarks came amid market expectations that China will ease credit conditions further after the world’s second largest economy posted the slowest growth in almost 30 years.
“It is necessary to focus on preventing risks on the basis of steady growth, while strengthening the countercyclical adjustment of fiscal policy and monetary policy and ensuring that the economy operates in a reasonable range,” Xi said.
China should seek stable development of its economy while not forgetting to fend off risks to its financial system and efforts should be made to address the issue that the cost of legal and regulatory breaches in the financial sector, especially in the capital market, is too low, said the president.
The country should keep a fine balance between maintaining growth and forestalling risks, and deal with risks in key areas in a targeted and effective manner, he said, adding that China should deepen opening-up of the financial sector.
In 2018, the country removed foreign ownership caps of banks and financial asset management firms. Foreign capital was also allowed to have majority ownership of securities firms, fund managers and futures companies.
Reforms including revamps of the market access system and trading regulations should be deepened, and regulators should take a two-pronged approach to enforcing both prudential management at the macro-economic level and supervision over activities at the market level, Xi said.
An all-around and multilevel financial services system including venture capital, bank loans and stock and bond markets will be put in place and meanwhile, a multilevel banking system with wide coverage and diverse expertise should be established, while personalized and differentiated financial products that suit market demand should be developed, he said.
The supply-side reform in the financial sector refers to two aspects – developing direct financing to improve the quality of financial services provided to small- and micro-sized companies and technology and innovation startups and meanwhile, reducing financial risks with more deleveraging efforts in the real estate sector, state-owned enterprises and local governments.
Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology, said mainland-listed firms violating related regulations now generally only face administrative punishment, and the system for investors to protect their rights should be refined.
The reform, Dong added, is fundamental for revamping the stock and bond markets that could offer the ultimate solution to financing difficulties faced by the private sector, said Dong.