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Chinese financial system faces overhaul

Monday 4 July 2011 - by Will Henley

China-based financial institutions are bracing for a shake-up of the country's regulatory architecture, after its central bank said it would "push forward" with major reforms.

The declaration, posted on the website of the People's Bank of China on Sunday night, came at the end of official Communist celebrations to mark the party's 90-year anniversary.

It said it plans to "seize an important strategic growth opportunity for the Chinese economy to push forward the reform of key financial sectors, reform the country's financial system and improve the management of foreign exchanges".

The central bank asserted that it would be "targeted, flexible and efficient" and support medium and small enterprises which currently have little access to bank funding.

Last month, central bank governor Zhou Xiaochuan announced that the country would adopt a macro-prudential policy framework to facilitate reforms in the post-crisis world.


He said China would have to establish a counter-cyclical market and regulatory system in order to transform its economic growth.

China should introduce supervision of shadow banks and macro-economic management systems in order to reduce pro-cyclical effects on the economy, he said.

"We learned from the crisis that theoretically speaking, micro-prudential systems are not always equal to macro-prudential systems."

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Email: will.henley@gfsnews.com


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