Experts say nation will accelerate drive to build strong, efficient finance sector

China will enhance efforts to build a strong and efficient financial industry which will empower the country's high-quality growth and modernization drive after a tone-setting policy conference stressed the strategic importance of the sector, experts said on Wednesday.

The central financial work conference, which concluded on Tuesday, outlined steps to build up the country's financial competitiveness, signaled more efforts to optimize financial supervision to prevent and defuse risks, and will boost market confidence, they said, adding that more detail-oriented policy measures and tools can be awaited.

Xi Jinping, general secretary of the Communist Party of China Central Committee, who is also Chinese president and chairman of the Central Military Commission, delivered key remarks at the two-day conference, laying out plans for the financial sector for the current and coming periods.

The gathering of top financial policymakers came after China reshaped its financial regulatory architecture earlier this year. The country currently faces growing global geopolitical uncertainties and a tepid economic recovery, which are intertwined with government debt issues and a sluggish property market after three years of the pandemic.

"China must build a strong and efficient enough financial industry to ensure the financial stability and high-quality development of the world's second-largest economy. That, to some point, will determine the outlook and global competitiveness of the Chinese economy over the next decades," said Zhang Yansheng, chief researcher at the China Center for International Economic Exchanges.

He advocated reforms and opening-up in the financial industry and the decisive role of market forces in allocating financial resources, which he said were crucial to boosting the high-quality development of the financial industry in order to fully build a high-quality economy.

Noting that finance is the "lifeblood" of the national economy, the leadership at the meeting said that the financial industry must solve problems including low efficiency, hidden economic and financial risks, and a relatively weak supervisory and governance capacity, to provide high-quality services for economic and social development.

The meeting called for vigorous efforts to create a sound monetary and financial environment, while stepping up quality financial services for major strategies, key areas and weak links. It said that a prudent monetary policy should be maintained, and called for a greater focus on conducting cross-cyclical and countercyclical adjustments and enriching monetary policy tools.

Chen Daofu, deputy director of the Research Institute of Finance, which is part of the Development Research Center of the State Council, said the meeting sent a signal that efforts will likely be accelerated to develop a modern finance system with Chinese characteristics, where market-oriented and law-based reforms will be advocated while the Party's leadership will also be stressed.

He expects that new structural monetary tools are likely to be launched so that more financial resources can flow into the areas of technological innovation, advanced manufacturing, green development and smaller businesses.

Liu Xiaochun, vice-president of Shanghai Finance Institute, pointed out that the meeting called for solid work on developing science and technology finance, green finance, inclusive finance, pension finance and digital finance. Those areas are key for China to pursue high-quality economic development and switch to a new growth model, Liu said.

Latest data from the People's Bank of China, the nation's central bank, showed that as of the end of September, outstanding yuan-denominated loans issued by financial institutions totaled 234.59 trillion yuan ($32.05 trillion), up 10.9 percent year-on-year. Loans to areas including green development, science and innovation enterprises, and inclusive finance increased relatively fast.

Chang Haizhong, executive director of corporates at rating agency Fitch Bohua, said the central bank may further encourage commercial banks and policy banks to increase relevant credit or loans flowing to these areas.

The meeting also emphasized the need to comprehensively strengthen financial supervision and effectively forestall and defuse financial risks, including efforts to "optimize the debt structure of the central and local governments" and "promote the virtuous development cycle between the financial and the property sectors". Experts including Chang said these efforts were likely to be made through coordinated actions by various institutions, including fiscal authorities, financial regulatory institutions, commercial banks and local governments.

Zhang Ming, deputy director of the Institute of Finance& Banking at the Chinese Academy of Social Sciences, predicted that the central government may take on more debts in the future. Meanwhile, local governments are expected to avoid issuing large-scale debts to finance economic growth, and financing for public welfare projects with a large capital scale, slow turnover and low investment returns will become more rational.