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CNN
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As the tech war with the United States escalates, China has announced major government reforms to regulate its financial system and boost its technological self-sufficiency.
Chinese leader Xi Jinping Posts.
Tighter control over key sectors is thought to help C’s priorities, from maintaining social and economic stability to managing rising geopolitical tensions with the United States.
“These proposed institutional changes reflect a key focus of Chinese policymakers in the next few years, which is to improve financial regulatory coordination to improve financial stability,” Goldman Sachs analysts said on Wednesday.
The State Council, the highest executive body of the government, oversees 26 ministries and dozens of ministerial-level administrative bodies. Although major decisions are ultimately made by the Politburo of the Communist Party, the State Council exercises some power to implement policies, particularly in economic matters.
Beijing also plans to reduce the size of the so-called “iron rice bowl”, which is known for its security measures. Civil servant jobs in the central government will decrease by 5% in the next five years.
Among the changes announced Tuesday at the annual meeting of the National People’s Congress, Beijing will establish a powerful new financial watchdog – the National Financial Supervisory Authority (NFRA).
It will replace the China Banking and Insurance Regulatory Commission (CBRC), which oversees commercial banks and insurance companies.
He directly manages the country’s major financial firms, including fintech giant Ant Group, a role he previously held. of People’s Bank of China. It is also responsible for financial consumer protection and investor protection.
Ken Cheng, managing director of Asia foreign exchange strategist at Mizuho Bank, said some analysts said Beijing’s apparent move to rein in the state economy could scare off investors.
“Sentiment could be exacerbated as investors should be wary of any regulatory action, given their experience in the technology sector, the housing market and the private education sector,” he said. It seems the battle for regulatory consolidation is far from over.
China’s financial system is traditionally regulated jointly by the People’s Bank of China, the CBRC and the China Securities Regulatory Commission (CSRC).
Now, the new NFRA regulates all financial sectors except the securities industry, which remains under the CSRC.
The new regulator has the government’s intention to “better manage risks” in the financial system and “strengthen the supervision of institutions, behaviors and activities”. Surveillance would be “intrusive,” he added.
“Establishing a super regulator will help improve and expand regulations in the financial and banking industries, which are becoming more complex and interconnecting other industries,” Cheng said.
The move comes amid growing threats to the stability of China’s financial system amid a slumping housing market and economic slowdown.
The property sector, which accounts for more than a quarter of total bank lending, is in its worst slump on record.
Financial stress has already surfaced in a number of areas, from last summer’s protests by rural banks in Henan to widespread mortgage defaults and growing defaults by property developers.
As part of the reforms, the CSRC will be upgraded from a “public institution” to a “government institution”. In addition to its existing responsibilities, it will provide a new one to review and approve the issuance of corporate bonds currently under the National Development and Reform Commission.
The move reflects Beijing’s “greater focus on developing fair markets and better allocating more direct financing and mitigating the rise in debt,” Goldman Sachs said.
The proposal includes several efforts to boost Chinese technology and innovation as the United States tries to counter restrictions on the sale of increasingly sophisticated technology to China.
The existing Ministry of Science and Technology will be restructured and improved. It will be responsible for promoting a “whole nation system” for innovation by focusing more on basic research and applying technology to existing industries.
“In the face of fierce global technological competition and foreign protectionism and suppression, [we must] … to better integrate the forces of science and technology to overcome challenges in key technologies and to achieve rapid self-reliance in advanced technologies,” the proposal says.
On Monday, Xi slammed America when he called China Private companies partnered with the Communist Party to promote growth and technological innovation.
China will establish a new department to control mass data. The National Information Bureau will be responsible for developing information-related regulations and coordinating the exchange and use of information.
“Data … is set to become even more important in the future,” Citi analysts said. “It will be used under [a] More structured regulation will go forward.
Previous regulatory oversight of big tech may end, but industry regulation will become more “normal,” he said.
Beijing has launched a sweeping regulatory crackdown on the country’s internet industry from 2020 to the end of 2022, aimed at aligning powerful tech companies with its priorities. Before the move, the Communist Party made it clear that it needed “politically intelligent people” in the private sector who “strictly listen to the Party and follow the Party.”
—CNN’s Wayne Chang contributed to this report.
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