Central bank vows to deepen structural reforms in financial systems
China’s central bank vowed to promote supply-side structural reforms in the financial sector this year, in a bid to offer higher quality and more efficient services for the country’s real economy.
Pan Gongsheng, deputy governor of the People’s Bank of China, said they will endeavor to optimize funding structures as well as the financial market and product system in 2019, in a response to the central government’s recent call to make supply-side reforms in the financial industry.
More specifically, the central bank aims to bring the bond market into full play and let it play its role in supporting the real economy and the capital replenishment of commercial banks and other financial institutions.
More incentives will be given to promote the issuance of credit bonds and the development of an asset-backed securitization market, a statement from the regulator said.
Asset-backed securities, or ABS, are bonds created from various types of consumer debt. For example, when a person borrows money, taking out a home-equity or auto loan, then their loans will become assets on the books of the institution that extends the credit, whether it be a bank or a consumer finance firm.
To diversify its capital market structure, China loosened relevant regulations on the issuance of such financial products in May of 2012 and the industry has shot up dramatically since then.
Last year saw continued growth momentum in the ABS sector, with the volume of new issuance hitting 2.003 trillion yuan (US$298.9 billion) as of the end of 2018, according to data from Wind Information, a Shanghai-based service provider of financial data, information and software.
PBOC pledged to strengthen the supervision and construction of the gold and bill market, tighten the management of the interbank lending segment and boost the innovative development of various capital markets.
Pan added that they will carry on rectification over the Internet finance sector and seek to build a long-term regulatory system for the industry.
Meanwhile, the central bank will identify key areas that are in bad need of credit support and it will encourage more lending to small and private businesses, rural revitalization and the upgrading of traditional manufacturing industries.
While spurring development of the country’s multi-level capital market, Pan also cautioned against the risks facing the financial system.
“China has entered a new stage of development,” the senior official said. “The task of preventing and resolving major risks remains arduous given the downward economic pressure.”