Refinitiv Newscasts - BVTV: China’s super-regulator

China Renaissance Holdings

08/03/2023 09:01

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Source: Reuters

Description: The Chinese government has announced plans for a sweeping
restructuring of its financial bureaucracy. This will grease the wheels of an
ongoing anti-corruption campaign. As Pete Sweeney argues, it’s also an
attempt to contain a big municipal debt crisis.
Short Link: https://refini.tv/3IQpwTS

Video Transcript:

China is upsizing its super-regulator. The Chinese government announced plans
for a sweeping restructuring of its financial apparatus on Tuesday, creating
an even more powerful body to oversee banks and insurers while elevating the
securities watchdog and stripping functions from the central bank. This comes
after a series of corruption prosecutions in the financial sector that began
last year, which seen prosecutions of high-profile figures in government. The
private sector is also under scrutiny. Bao Fan, CEO of investment bank China
Renaissance, disappeared from public view in February to assist authorities in
an investigation. And state media has started railing against "hedonistic"
bankers. This marks the second try to fix this corner of the bureaucracy
following a similar attempt in 2018 which Beijing has now found
unsatisfactory. Investors unsure of what problems supposed to solve have sold
off shares in Chinese companies, especially those listed in New York and Hong
Kong. Some changes will indeed grease the wheels of further corruption
investigations what might be what investors are nervous about. But more
importantly, they will make it easier for President Xi Jinping's
administration to come to grips with a brewing municipal credit crisis. Local
governments together owe some $9 trillion, equivalent to half the country's
annual economic output. And many of them are struggling to make payments. This
new structure will streamline control over regional governments' bond
issuance, for one thing, and will eliminate or centralize branches in smaller
towns where individual regulators tended to go negative as it were, looking
the other way as local entities ran up debts to unsustainable levels. In
aggregate, these little crisis now add up to a major threat to financial
stability. Corruption investigations aside, this reorganization is basically a
central power grab