New Central Bank Chief Outlines Three Principles for Financial Sector Opening

Further financial sector liberalization is needed to improve competitiveness, said the new head of the People's Bank of China (PBOC) during one of his first public appearances less than a week after being named China’s first new central bank governor in 15 years.

Financial sector opening should follow three principles, Yi Gang said during the 2018 China Development Forum in Beijing.

As a competitive service industry, the financial sector should abide by pre-establishment national treatment and the negative list system, he said, outlining the first of those principles.

Second, the opening of the financial industry must be coordinated with reform of the exchange rate mechanism and the capital account convertibility process, he said.

Third, equal emphasis should be placed on financial risks.The level of opening should be matched to regulatory capacity, said Yi.

“If we follow these three principles, we will be able to continuously push forward financial sector opening,” Yi said.

"The years of reform and opening have taught us that the sectors that are open are more competitive and that closed sectors are more likely to fall behind and accumulate risks," he said.

In addition to reform and opening of the financial sector, Yi said, maintaining a prudent and neutral monetary policy and preventing and mitigating major risks are other major tasks for the country's financial regulators.

In response to a question about potential trade war-inflicted risks to the financial system, Yi said that China’s financial markets are in a good position to mitigate external risks.

"Market volatility, especially in the asset market, is a normal occurrence under market economy conditions," Yi said.

“We need to first prevent systemic risks and take care of our own affairs. ... If we can manage our own risks, we will be more resilient to external shocks."

He added that given the current condition of China's banking, securities and insurance markets, the country is in a good position to mitigate external risk.

Contact reporter Liu Xiao (liuxiao@caixin.com)