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June 13, 2016

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Tighter scrutiny call at finance forum

TIGHTER scrutiny of the financial sector amid the challenges of global economic growth and China's financial reform was one of the themes that emerged during the Lujiazui Forum in Shanghai yesterday.  
Four top-level officials, including Xiang Junbo, chairman of the nation's top insurance regulator, spoke during the morning session of the two-day meeting, discussing China's approach in developing a more reasonable financial market under supply-side reforms.
"China has established a relatively complicated financial system with diversified products," Zhang Tao, deputy governor of People's Bank of China, told the forum. "But the general level of our financial services still has much room for improvement, as we should face and solve the structural weakness shown by some specific sectors."
Zhang spoke about the financial macro prudential management mechanism in cooperation with the government's plan of leveraging down and capacity elimination, and highlighted the necessity of bringing in financial innovations such as peer-to-peer lending and equity crowd funding into the mechanism. New financial technologies brought explosive development in China's Internet financial sector, providing services for broader investors, Zhang said.
"Financial innovation itself is affirmative, but at the same time, we should not overlook the risks hiding behind, which calls for further regulation and management to catch up with the pace of sector's development," he said.
Boom in private lending
China's private lending sector is booming along with the difficulties of small and mid-capital enterprises to raise funds. The numbers of online lending platforms has risen to more than 2,000 in less than three years with a third of them shut down due to fraud and operational failures.
Zhang emphasized the importance of market discipline, as he pointed out the placing of "an ordered exit mechanism for failed or risky financial institutions," allowing reconstruction and bankruptcy to happen.
The attitude toward tightening rules over financial market behavior was echoed by Jiang Yang, vice chairman of China Securities Regulatory Commission. Jiang pointed out risks over assets mergers and acquisitions.
"What we should focus on at present, is a solid capital market foundation composed of listed companies," Jiang said. "The market shouldn't allow sensational hype that pushes forward acquisitions. We will look closely at the spillover risks brought by certain financial products and stick to our bottom line in preventing systematic risks."
Xiang said macro prudential management mechanism should be carried out with micro measures in the insurance sector to prevent risks in a long term.
Guo Ligen, vice chairman of China Banking Securities Commission, spoke of distorting trends in inclusive finance and called for value-added ideas on sustainable business models instead of simple donations or small capital loans.
The forum, co-chaired by the Shanghai government and the four central financial regulators, was established in 2008 as a platform for discussions about recent moves in the country's financial opening-up.
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