China has committed to ambitious carbon emissions targets and is fully focused on transitioning to a green economy. The financial sector is going to play a key role in achieving these objectives.
CBIRC announces list of financial institutions eligible to participate in China’s private pension system
While China’s rapidly aging population makes the development of the third pillar of the pension system an increasingly urgent priority, regulators are approaching its rollout with characteristic caution. The initial cohort of financial institutions have been carefully screened for their financial stability and business practices to ensure that the system’s debut is as smooth as possible.
Financial institutions are the latest targets of the Hengqin zone. In August and September, the Hengqin government announced schemes to attract semiconductor companies and listed companies respectively.
Following a string of high-profile scandals at major insurers in recent years that required bailouts, regulators want to ensure that the industry’s rescue fund is fit for purpose, adequately funded, and is endowed with rights befitting its role. By requiring bigger pay-ins from riskier insurers, the CBIRC can reduce the risk of moral hazard and incentivize riskier firms to get their balance sheets in order.
As climate change exacerbates the frequency and intensity of natural disasters, policymakers want to ensure that sufficient financial infrastructure is in place to mitigate human and economic damage. This includes ensuring that insurance claims are handled efficiently and professionally.
China has been working hard to make its RMB 138.2 trillion bond market more attractive to FIIs over the past two to three years, removing obstacles that investors have complained hinder their ability to trade and make the market less appealing. But in spite of Beijing’s efforts, FIIs have been pulling money out of the market this year amid concerns that economic growth is declining, mainly as a result of the government’s zero-COVID policy.
China is in the midst of a major overhaul of laws and regulations that govern the financial system to ensure they keep up with the significant changes that have taken place over the past decade. The law governing the People’s Bank of China is being revised, and new laws or regulations in areas such as futures and derivatives, foreign-funded banks and data protection have been promulgated or are in the works.
While cyber insurance is an inevitable outgrowth of mass digitization, developing appropriate products is much easier said than done. Cyber theft is rampant in China, and large companies are almost guaranteed to have a data breach at some point.
Although China’s property insurance & casualty industry has experienced significant growth over the past decade, policymakers want to see the sector play a bigger role in supporting the economy and national development goals. As China seeks to move its economy up the value chain, transitioning from a period of fast-paced growth to higher-quality growth, property insurance will be critical to backstopping hard won economic gains.
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Shenzhen Data Exchange joins a group of half a dozen newly formed institutions informally called Data Exchange 2.0 by policymakers. While the various Data Exchange 2.0 members are competing to be the first to fully operationalize, we don’t expect the national data transaction market to take off just yet.
It’s unclear whether or not these moves are directly related to Common Prosperity – not least because it’s still unclear what exactly Common Prosperity is meant to look like in practice. However, whatever the underlying rationale, there appears to be an incipient clampdown on financial industry compensation brewing.
Beijing is transitioning to an economic strategy focused on high-quality growth, self-reliance, and innovation – and it wants SOEs to play a dominant role in that process. These measures lay the groundwork to ensure that the financial system plays its part.
CBIRC released new measures to strengthen oversight on life insurance products information disclosure
Although China is the world’s second-largest insurance market, on a per capita basis it is seriously underinsured. The government understands the importance of insurance and wants to see further growth in an industry that was plagued by scandal and weak supervision under the reign of regulator Xiang Junbo, who was taken down for corruption in 2017.
Cai and Qiu essentially reiterated the message delivered by China Securities Regulatory Commission Vice Chairman Fang Xinghai at the China International Import Expo on November 5. That message: central policy will continue to…
GBA regulators have long sought to make Hong Kong insurance products available on the mainland. Once major purchasers of Hong Kong insurance products, mainland customers have been largely unable to travel to the city to buy insurance due to stringent COVID-19-related border restrictions.
Fang is right that financial opening has ticked up in recent years – and regulators do indeed want it to continue. However, the nature of that opening has been gradually shifting.
Corporate groups are large, complex organizations. The opacity of both their ownership structures and internal oversight procedures has made their finance companies prime breeding grounds for corruption and risky practices, including irregular lending outside of the group. These rules are lengthy, comprehensive, and specific – the CBIRC means business with this document, which seeks to standardize, improve transparency, and improve regulation of internal financial services within large organizations.
Confirmation is information – there may be nothing new here, but that means Beijing is pleased with where things are headed vis-à-vis the rollout. It’s also clear – and good news – that the various regulators involved in this massive project are coordinated and on the same page – never a given in Beijing’s financial regulatory apparatus.
China’s fiscal and taxation systems are in dire need of an overhaul and the top leadership knows it, although it’s been reluctant to tackle the problems in a serious way. The shortcomings of the current fiscal system, which emerged after the reforms of 1994, have left local authorities shouldering most of the fiscal burden without the necessary fiscal income.