The once-every-five-years National Financial Work Conference might be the most important thing that happened over the weekend.
The conference has been convened every five years since 1997 and is widely considered to set the tone for the financial sector in next five years.
One important move is that during the occasion this year, President Xi Jinping announced the establishment of the Financial Stability and Development Committee.
Xi stressed that serving the real economy is the basic duty and purpose of the financial sector and the fundamental way to guard against financial risks, echoing his financial policy agenda since he took over the helm in 2012.
The official Xinhua news agency published a 3,300-word report on the conference, and Xi’s remarks took up 2,200 words.
Xi highlighted that financial work should stick to four principles — returning to the origin, optimizing the structure, strengthening regulation and following market rules.
The four principles basically centers around the concept of maintaining “stability”.
The financial sector should “serve the real economy, which should be the starting point and finishing line,” noted Xi.
Xi also pointed out that financial sector development should go with social and economic development in harmony. And financial regulation should focus on the bottom line of averting systemic financial risks.
“Financial resources should be allocated more efficiently, and government macro control should be improved, market rules should be sound and disciplines should be enhanced,” he added.
Xi’s strong emphasis on safeguarding financial stability may disappoint those who hope for deepening financial reforms.
Meanwhile, the cabinet-level Financial Stability and Development Committee under the State Council has yet to disclose its major responsibilities. The committee is expected to coordinate all financial regulators.
Just by looking at the name of the new committee, it is revealing enough that Xi wants stability to come first and development second.
“Local governments should follow the unified rules of the central government, and be held accountable for preventing financial risks at the local level. Xi said it would be “negligence of duty” if regulators fail to identify risks in time, and it would be “malfeasance” if they fail to report and contain the identified risks.
In fact, the credit crunch of LeEco and the sell-off of stocks and bonds of Chinese conglomerates Wanda, Fosun and HNA Group stemmed from the trend of tightening financial regulation.
No wonder conglomerates are keen to reposition themselves as non-finance operations these days.
This article appeared in the Hong Kong Economic Journal on July 17
Translation by Julie Zhu
[Chinese version 中文版]
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