Vice governor of PBOC highlights financial risks

Vice governor of China's central bank on Tuesday highlighted the country's current financial risks, promising to strengthen and improve financial regulation.

China's economy is running in a reasonable range, with controllable financial risks; however, due to various uncertainties, financial risks remain prominent in some sectors or regions, said Liu Shiyu, when delivering a report to the Standing Committee of the National People's Congress, the top legislature.

The debt ratio of enterprises is excessively high due to the rapid expansion of some of them and local financing platforms, resulting in greater payment risks and credit risks, Liu said.

The credit default risks of some sectors and regions have increased, as commercial banks' non-performing loan balances have climbed for 10 quarters in a row, and the non-performing loan ratio is also rising, he noted.

In the meantime, liquidity management has become more difficult as some inefficient enterprises account for a large amount of funds while small and mid-sized ones suffer difficulties in financing. Liquidity management is becoming more difficult and complicated due to the United States' withdrawal of quantitative ease.

Hidden dangers in the network and information security of the financial industry also continue to exist, in particular the industry's increasing reliance on the Internet and other open systems, according to Liu's report.

Risks in the businesses of shadow banking, abnormal fluctuations of cross-border capital flows, and the rise of expiration payment and surrender rates are also dangers in China's financial sectors, warned Liu.

In a bid to address those risks, he said, the central bank will use integrated monetary policy tools to better service the real economy, and strengthen financial risk monitoring and analysis so as to prevent and defuse risks in a timely manner.

According to the senior banker, the central bank will strengthen financial regulation, improve the market system and monitoring of cross-border capital flows, and deepen reform in financial sectors in order to to strengthen defenses against risks.