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Appeal for unified financial regulation

CHINA needs a unified regulatory standard among its banking, insurance and securities industries to boost financial innovation as cross-segment products grow in popularity, said a Chinese financial regulatory veteran yesterday in Shanghai.

"With the rising trend of financial innovation such as asset-backed securities in China, we need a cooperative regulatory system to better develop China's financial industry," said Wu Xiaoling, former vice governor of the nation's central bank and now deputy head of the Financial and Economic Committee.

China has three different regulatory bodies - the China Banking Regulatory Commission, the China Insurance Regulatory Commission and the China Securities Regulatory Commission - to supervise its three financial industries, plus the People's Bank of China to steer monetary policy.

"It may not be possible for China to have a single and united financial regulatory body now," said Wu at a discussion of senior financial experts from Shanghai and the City of London. "However, the central bank and the three financial regulatory bodies need to have a unified regulatory principle, concept and standard, to boost financial innovation."

More cross-segment financial products are popping up in China, triggering the need for such a mechanism.

"The supervision of a product should not be limited to its originating industry but should be dictated by its true character," she said.

Qian Wenhui, executive vice president of the Bank of Communications, said he expects more detailed, transparent and easy-to-operate regulations from watchdogs.

"We see more opportunities for breakthroughs in China's underdeveloped bonds markets, or from fixed-return products," Qian said.

Xu Ming, assistant general manager of the Shanghai Stock Exchange, said financial innovation is a double-edged sword.

"We need financial innovation to push the development of the financial market. But we also need enough regulatory supervision to guide such innovation," Xu said.

Xu said the origin of the financial crisis was the over-development of financial innovation and the lack of regulation in the United States. China should learn from this lesson in offering proper regulation, she said.


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