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Central Bank Chief: Special Committee Sharpening Financial Oversight

By Peng Qinqin and Leng Cheng
People's Bank of China Governor Zhou Xiaochuan (above) said that tighter licensing and management of China's internet finance industry, which has been abused by scammers, has become the new norm. Photo: Visual China
People's Bank of China Governor Zhou Xiaochuan (above) said that tighter licensing and management of China's internet finance industry, which has been abused by scammers, has become the new norm. Photo: Visual China

A special People’s Bank of China (PBOC) committee has set its sights on shadow banking, asset management firms, internet financing and opaque financial services, central bank Governor Zhou Xiaochuan announced at a Washington conference.

Zhou said the Financial Stability and Development Committee is busy consolidating asset management industry regulation, strengthening licensing requirements for internet finance companies, and closely supervising arbitrage involving financial services firms.

The committee has been in the spotlight since July, when policymakers convened a high-level meeting held once every five years to discuss financial reform coordination and risk prevention. The committee’s members have not been named.

Zhou’s remarks at the G30 International Banking Seminar in the U.S. capital on Sunday marked the first time a PBOC official has elaborated on the committee’s responsibilities.

The central bank chief described financial system threats that Chinese regulators are eager to address.

“Some large private companies have obtained financial licenses by acquiring related services,” he said. “But that didn’t necessarily make them financial service conglomerates in a real sense. There may be connected transactions and other illegal behavior during the process.”

On the subject of China’s internet finance industry, a fledgling business sector that’s been abused by scammers, Zhou said tighter licensing and management have become the new norm.

“Some technology companies started to provide credit and payment services, or sell insurance products without licenses, which intensified competition in the sector and increased financial stability risks,” Zhou said.

Turning to China’s economic health, Zhou surprisingly predicted the nation’s gross domestic product (GDP) growth rate will likely rise to 7% in the second half of this year. The first-half rate was a forecast-beating 6.9%.

Zhou credited rapidly growing household consumer spending for the economy’s unexpected strength.

The government’s GDP growth target for this year is at least 6.5%. Last year’s rate was 6.7%.

Zhou also touched on China’s debt issues, arguing that nonperforming-loan levels are relatively low and risks tied to the shadow banking sector have eased somewhat.

Meanwhile, local authorities in Jiangsu province, the city of Shenzhen and other parts of the country are reportedly upgrading financial-system oversight mechanisms to add more clout to the regulatory work now handled by local PBOC branches and other financial regulators.

Zhou said the government is confident about its ability to guard against systemic risks while also maintaining healthy and stable fundamentals.

“We will push forward fiscal reform to actively respond to all relevant problems,” Zhou said. “We believe those problems will be resolved gradually, and our financial markets will become more transparent and healthy.”

Zhou has served as central bank chief since 2002, longer than anyone else.

Contact reporter Leng Cheng (chengleng@caixin.com)

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