China plans to revamp finance, tech oversight

Delegates and officials gather at The Great Hall of the People in Beijing on March 5, 2023, for the opening of the annual National People's Congress.
Lintao Zhang | Getty Images News | Getty Images

BEIJING — China plans to overhaul its financial regulatory system by consolidating aspects of the central bank and securities regulator under a new entity, while doing away with the existing banking regulator.

That's according to a draft released late Tuesday as part of China's ongoing annual parliamentary meeting, known as the "Two Sessions." Delegates are set to approve a final version on Friday.

The changes follow similar adjustments to China's government structure that have occurred roughly every five years over the last few decades. The moves also come as Beijing has increased regulation on parts of the economy that had developed quickly, with little oversight.

The latest plan calls for the establishment of a National Financial Regulatory Administration, which replaces the China Banking and Insurance Regulatory Commission and expands its role.

The new regulator is set to oversee most of the financial industry — except for the securities industry. Responsibilities include protecting financial consumers, strengthening risk management and dealing with violations of the law, the draft said.

There are sectors in China that are 'naturally consolidating,' says Credit Suisse
There are sectors in China that are 'naturally consolidating': Credit Suisse
Street Signs Asia

The China Securities Regulatory Commission's investor protection responsibilities are set to shift to the new financial regulator.

The People's Bank of China's responsibilities for protecting financial consumers and regulating finance holding companies and other groups are also set to shift to the new administrator.

"China's regulatory reforms will strengthen regulators' capability to establish and enforce a unified regulatory framework, as well as reduce the room for regulatory arbitrage," David Yin, vice president, senior credit officer, at Moody's Investors Service, said in a note.

"In addition, the reform targets to strengthen the central government's control of financial regulation at the local government level, which will improve regulatory enforcement and reduce local governments' influence on financial institutions," Yin said.

Separately, the draft proposed the PBoC consolidate its local branches with greater central control, and changing the securities regulator's designation within the State Council from one similar to the council's Development Research Center to that of the customs agency.

"China's consolidated financial regulatory body is [a] paradigm shift to ramp up oversight of its vast financial system," said Winston Ma, adjunct professor of law at New York University.

A new data bureau

Party-state relationship

Changes for tech

Read more about China from CNBC Pro

Jumping on the China bandwagon? Analyst reveals whether A-shares or H-shares are a better bet

Bank of America loves this under-the-radar streaming stock out of China, sees 30% gain

Asia tech is back, Bernstein says, naming Alibaba and 5 more top picks

China must work faster to achieve self-reliance in tech "in the face of severe international scientific and technological competition and external containment and suppression," Xiao said.

The Biden administration has increased restrictions on the ability of Chinese businesses to obtain critical tech for the use and development of high-end semiconductors.

The new Ministry of Science and Technology's responsibilities include resource allocation and supervision, while oversight of agriculture science and biotech are set to be moved to other ministries, Xiao said in the supplementary document.

High-tech development and industrialization plans fall under the Ministry of Industry and Information Technology, the document said.

State-owned enterprises


Related Posts