China's central financial work conference's 8 key points and proposals

Editor's note: Lian Ping is the chairman of China Chief Economist Forum. The article reflects the author's opinions and not necessarily the views of CGTN. It has been translated from Chinese and edited for brevity and clarity.

The sixth central financial work conference was held in Beijing on October 30 and 31. The central financial work conference is the top-level meeting in China's financial sector, and its policy deployments in financial stability and fields such as regulation and institutional reform have paramount guiding significance for the long-term development of China's financial industry. The conference outlined eight crucial points and proposals for China's financial sector's future direction. Here's a summary:

Key point 1: Strengthening the centralized, unified leadership over financial work

In this conference, it was proposed for the first time to give full play to the role of the Central Financial Commission as well as financial commissions and financial work commissions under local party committees. The conference is also the first nationwide financial work conference held after the establishment of the Central Financial Commission and the Central Financial Work Commission.

Key point 2: Accelerating the construction of a modern financial system with Chinese Characteristics

The conference, for the first time, comprehensively introduced the concept of a "modern financial system with Chinese characteristics." The report to the 20th National Congress of the Communist Party of China outlined the grand blueprint of "modernizing the industrial system and advancing Chinese modernization." In line with this, China should firmly pursue a development path with Chinese characteristics for its financial future in the coming period, always putting people at the center of financial development, serving the real economy and national strategies, and making high-quality development the theme of financial reform and development.

Key point 3: Finance should provide high-quality services for economic and social development

The conference set higher goals and requirements for the future of China's financial work, including "providing high-quality services for economic and social development," "creating a favorable monetary and financial environment," and offering premium financial services for key fields of strategic significance and vulnerable links. Firstly, it proposed to "maintain the prudence of monetary policy," specifying that in the coming years, China must implement prudent monetary policies, avoid drastic fluctuations in policies and measures, refrain from excessive monetary easing, maintain rational and adequate liquidity in the market, and keep monetary and credit at an appropriate amount and a steady pace. Secondly, China should optimize its fund supply structure, directing more financial resources toward propelling technological innovation, advanced manufacturing green development and supporting small and medium-sized enterprises. In addition, the financial industry itself also needs high-quality development, focusing on five areas: fintech, green finance, inclusive finance, pension finance, and digital finance.  

Key point 4: Concentrating efforts to modernize financial institutions and market systems

In the context of building modern financial institutions, the conference put forward the concept of "cultivating first-class investment banks and investment institutions." The conference emphasized the need to "improve institutional positioning" and "enhance corporate governance and perfect the system of the modern financial corporate system with Chinese characteristics." It called for supporting large state-owned financial institutions in becoming better and stronger, playing a major role in preserving the real economy and being a cornerstone for financial stability. It also encouraged small and medium-sized financial institutions to engage in featured operations based on local conditions. 

Key point 5: Promoting high-level financial opening up

The conference pointed out the necessity of promoting high-level financial opening up, steadily expanding institutional opening up in the financial sector, facilitating cross-border investment and financing, and attracting more foreign financial institutions and long-term capital to operate and invest in China.

The conference stressed the importance of strengthening the competitiveness and influence of the Shanghai International Finance Center and consolidating and elevating Hong Kong's status as an international financial hub. In the coming period, the capabilities of the Shanghai International Finance Center are expected to increase significantly, and its position as the leading center for renminbi financial asset allocation and risk management will be further solidified. Hong Kong is expected to strengthen its competitiveness and attractiveness in areas such as securities, bonds, asset management, and offshore renminbi business hub, promoting international financial cooperation among cities in the Guangdong-Hong Kong-Macao Greater Bay Area through policy innovation.

Key point 6: Comprehensively strengthening financial regulation  

The conference emphasized regulating all financial activities and effectively preventing and resolving financial risks under the law, thereby enhancing the effectiveness of financial regulation. In the next few years, comprehensive strengthening of financial regulation will be a top priority in China's financial work. Specifically, it involves comprehensive reinforcement of institutional regulation, behavioral regulation, functional regulation, and penetrative regulation, exerting continuous regulation and eliminating regulatory gaps and blind spots. Furthermore, it also encompasses the regulation of key risk areas such as small and medium-sized financial institutions, local government debts, and the real estate market.

Key point 7: Effectively preventing and resolving financial risks

The conference stressed that risk prevention and control should be considered as an eternal theme of financial work. Specifically, active efforts will be made to address four specific types of risks in the coming period. The first is the risk of local government debt. The conference specifically called for the establishment of a long-term mechanism for preventing and resolving local government debt risks and the development of government debt management mechanisms compatible with high-quality development. The second is the risk of small and medium-sized financial institutions. The third is the risk of illegal financial activities. This will be addressed by eliminating regulatory gaps and blind spots and by regulating all financial activities by the law, comprehensively strengthening institutional, behavioral, functional, and penetrative regulation, and exerting continuous regulation. The fourth is the strengthening of foreign exchange market management to keep the exchange rate of the Chinese yuan stable at a reasonable and balanced level.

Key point 8: Improving macro-prudential management of real estate finance  

Due to significant changes in the supply and demand structure of the Chinese real estate market in the medium to long term, the conference placed a greater emphasis on preventing and resolving financial risks in the real estate sector, requesting better support for satisfying the demands for basic housing, housing improvement, and indemnification housing. The conference introduced the concept of "improving the subject regulatory system and fund management of real estate enterprises and enhancing macro-prudential management of real estate finance." It requires not only risk prevention but also the construction of a long-term risk-addressing mechanism to strengthen the supervision of real estate enterprises' accounts for pre-sale funds. The conference also required "better support for the housing demands of residents, including the needs for basic housing and housing improvement, and accelerating the construction of three projects of indemnification housing." In the next stage, individual housing financial policies will focus on implementing differentiated housing credit policies based on local urban conditions.

(Contributors to this report also include Liu Tao, Deng Zhichao, Ma Hong, and Wang Yunjin; Courtesy: China Chief Economist Forum)

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