Source: GT Published: 2024-05-27

Xi Jinping, general secretary of the Communist Party of China (CPC) Central Committee, presided over a meeting of the Political Bureau of the CPC Central Committee on Monday, which deliberated on trial provisions concerning accountability for failing to prevent or defuse financial risks, according to the Xinhua News Agency.

The meeting released another strong signal that China will continue to step up efforts to prevent and defuse major risks in the financial industry, as the country moves swiftly to promote high-quality development and build itself into a global financial powerhouse, experts said.

Coming after a series of recent measures to tackle financial risks, the trial provisions for accountability will further improve institutional mechanisms to better prevent and resolve risks and promote the sound, high-quality development of the financial market, which plays a critical role in the overall economy, experts further noted.

Notably, the meeting stressed that preventing and defusing financial risks is related to national security, overall development, and the security of people's property. It is a major hurdle that must be overcome to achieve high-quality development, according to the meeting.

The trial provisions for accountability are also aimed at urging officials at all levels to establish a correct view of performance and better carry out various tasks of comprehensively strengthening financial supervision, preventing and defusing financial risks, and promoting high-quality financial development, the meeting noted, stressing strictness in implementing the trial provisions.

The meeting further underscored the top Chinese leadership's focus on tackling financial risks and promoting high-quality development in the financial industry, experts said.

'Tackling financial risks has become a top priority for the CPC Central Committee, and addressing loopholes and weak links is a continuous effort,' Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at the Renmin University of China, told the Global Times on Monday.

Dong said that since the second half of 2023, when the stock market faced serious downside risks, there have also been major risks in related areas such as financial markets, the property sector and local government debt, which demands strengthened regulation. 'In order to tackle weak links in our country's financial regulatory system, I think strengthened provisions on accountability are imperative.'

Monday's meeting came after a CPC Central Committee Political Bureau meeting on April 30 that also stressed continuously preventing and defusing risks in key areas. It demanded research on policies to reduce housing inventory and improve the quality of newly-added housing. The plan for local governments to resolve debt risks should be thoroughly implemented, ensuring that provinces, cities and counties with high debt risks not only effectively reduce their debt burden, but also maintain stable development, it said.

The tone-setting central financial work conference in October 2023 stressed the comprehensive strengthening of financial supervision, improving the financial system, optimizing financial services, and preventing and resolving risks. Then in March, the Government Work Report called for greater efforts to effectively prevent and resolve risks in key areas.

Xi attaches great importance to the financial industry. At the opening ceremony for a study session on promoting high-quality financial development in January, Xi noted that the path for financial development with Chinese characteristics not only follows the way for the development of modern finance, but also has distinctive features that suit China's national conditions, and thus it is different in nature from the mode of Western financial development.

'We should have more confidence and continue to explore and improve our work in the financial sector, so that this path will become wider and wider,' Xi said, while stressing that risk prevention and control must be regarded as the abiding theme of financial work, according to Xinhua.

Continuous efforts

With the top leadership focused on building the country into a global financial powerhouse, greater policy measures and reforms are expected to be taken in the future, experts noted.

Preventing and defusing financial risks and deepening financial reforms are also expected to be on the agenda for the third plenary session of the 20th CPC Central Committee, which is expected to take place in July and will primarily study issues concerning further comprehensively deepening reform and advancing Chinese modernization, according to experts.

Cao Yuanzheng, chief economist at Bank of China International, said that the trial provisions on accountability are just 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, but we must also realize the importance of preventing and defusing financial risks, Cao told the Global Times on Monday, noting that trial provisions on accountability further improve the overall regulatory system, 'which is of great importance in preventing systemic financial risks.'

With continuous efforts by the top leadership as well as sound economic fundamentals, China's financial industry has great potential to become a global leader, experts noted.

'The real economy is very dynamic, which provides a solid foundation for high-quality development in the financial industry,' Dong said, noting that a top priority for China's financial work is to make sure that the financial industry will serve the development of the real economy.

China has already built a massive financial industry, with more than 4,000 banking institutions in total and five lenders assessed as global 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 defuse financial risks and promote high-quality development, China is also moving steadily to further open 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.