Setting financial tones(3)

National Financial Work Conference History

First Conference (November 1997)

The 1997 Asian financial crisis exposed the vulnerability of China's financial system. In a bid to prevent a similar financial fallout, China initiated reforms to the banking sector. The country also established the China Securities Regulatory Commission and the China Insurance Regulatory Commission to supervise the securities and insurance sectors, respectively. Moreover, the People's Bank of China replaced its provincial branches with nine regional subsidiaries, which helped make its monetary policies more independent.

Second Conference (February 2002)

As part of China's WTO entry commitment, the country pledged to open up its financial sector to foreign investors by the end of 2006. The conference decided to beef up reforms to the banking industry. The country in 2003 set up the Central Huijin Investment Ltd. to direct shareholding reform and share listing of commercial banks, including Industrial and Commercial Bank of China, China Construction Bank and the Bank of China. In the same year, the China Banking Regulatory Commission was established to supervise the banking sector.

At the conference, China also decided to reform the rural credit cooperatives and transform them into rural commercial banks.

Third Conference (January 2007)

At this conference, Chinese policymakers decided to continue deepening reforms to state-owned banks and build a modern banking system. The conference also mapped out plans to restructure the Agricultural Bank of China, transform the China Development Bank into a commercial institution and establish a foreign exchange investment company.

Eight measures for China's financial development

- Providing better financial services to facilitate economic and social development The financial industry must strengthen its service functions and market presence, tighten support to weak links of the economy, including agriculture and small and micro-sized enterprises. It is also imperative to enhance financial support to the country's economic rebalancing, energy conservation and emission reductions, environmental protection, as well as indigenous innovation.

- Deepening financial reforms Financial institutions must improve corporate governance, build an effective internal incentive mechanism and push forward diversification of their shareholding systems. Efforts will also be made to eliminate monopolies, allow private capital into financial service sector and encourage them to participate in shareholding reform of banks, securities firms and insurers. The policy financial institutions should adhere to policy-related businesses and the China Development Bank will continue with the commercialization reform.

- Tightening financial supervision and fending off risks The banks are supposed to build a complete risk management system, while the securities industry must improve market systems to protect the interests of investors. It is also necessary to enhance supervision over the compensation capabilities of insurance companies.

- Preventing and reducing risks of local government debts China's overall local government debts remain controllable, but it is still imperative to streamline the financing vehicles, control the overall scale of the local government debts and build an effective early-warning mechanism.

- Strengthening capital and insurance market building and promoting coordinated financial market development China will promote the healthy development of stock and futures markets, crack down on illegal financial trading platforms, regulate the bond markets and foster healthy insurance markets.

- Improving financial macro-controls China will enhance coordination between monetary and fiscal policies, as well as supervision and industry policies to ensure economic and financial stability. It will further improve the yuan exchange rate regime.

- Further opening up the financial sector to the outside world China will gradually push forward convertibility of the yuan under capital accounts and better manage the foreign exchange reserves. It will also deepen the mainland's financial cooperation with Hong Kong, Macao and Taiwan, help consolidate Hong Kong's status as an international financial center, and speed up development of Shanghai as an international financial center. The country will also take a more active part in global financial management.

- Reinforcing financial infrastructure construction and improving the market environment The country plans to further improve financial rules and relevant laws, build a unified credit record platform and improve financial infrastructures in fields like registration, payment and clearance.