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ASIA: China will open financial sector wider amid ‘quite limited’ impact of trade war, regulator says.


Added on 28/05/2019

As published on scmp.com, Monday 27th May, 2019.

 

China will further open its financial sector despite its trade war with the US, and it has no plans to engineer a currency depreciation to support its exports, its chief financial regulator said.

In an interview with state broadcaster CCTV aired on Monday evening, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said Beijing would open its doors wider to foreign financial institutions and it was confident it could control any potential fallout from the trade war.

According to Guo, China is focusing on boosting fundraising by its capital markets to support economic growth.

“One of our key [reforms] this year is to accelerate the development of the direct fundraising ability of our capital markets in order to support our economic development,” said Guo, who is also the Communist Party official overseeing the People’s Bank of China.

To facilitate that, Guo said China would widen access for foreign financial institutions.

“We will continue to expand the opening of our banking and insurance sectors. In the future, the controlling stake of foreign investors will not be limited to just 51 per cent, but [the ceiling] could even reach 61 per cent, 71 per cent, 81 per cent or even 100 per cent,” Guo said.

 “We hope there will be more foreign institutions, especially high-quality and world famous institutional investors, coming to China,” he added.

Guo also played down market speculation about a depreciation of the yuan, saying the Chinese government had no plans to engineer a lower value of the currency to boost exports.

“There was only one reason behind the fall [in early May] and that was the unilateral decision by the US government to increase the tariffs, and this has caused instability in the financial markets. Because of that, some people thought this would affect China’s exports to the US and also impact world trade and the global economy,” Guo said.

“As a result, the yuan was exposed to depreciation pressure and this was entirely the result of market [sentiment]. We have never taken any intentional measures that would cause depreciation of the yuan to offset [the impact] of conflicts over trade.”

The chief regulator also said Beijing was fully capable of controlling financial risks and China’s situation had significantly improved compared with two years ago.

 “Overall, our financial risk is under control. In the past two years we have reduced the high-risk assets [of financial institutions] by 12 trillion yuan. Because of that, we have effectively controlled our risks ... [Financial risks] have moved from the past status of ‘expanding’ to the current state of ‘retreat’.”

He added that Beijing had taken a “proactive approach” to handling risks instead of “waiting until a crisis happens”.