Sector's improvements outweigh risks: experts
China's financial sector is becoming more competent and efficient as well as being more flexible, experts told the Global Times on Wednesday. [Special coverage]
"In the past five years, China's financial sector has improved significantly. New problems have also emerged, but are not that important compared with the improvements," Cheng Shi, head of ICBC International Research, told the Global Times on Wednesday.
Focus on quality of growth
Liu Xuezhi, a senior analyst at Bank of Communications, said that five years ago, the priority in China's financial sector was growth, but nowadays, the sector is more focused on the quality of domestic finance.
Regarding traditional banking, Guo Shuqing, chairman of the China Banking Regulatory Commission, said on October 19 that the banking sector has assets of about 240 trillion yuan ($36 trillion) currently, up more than 83 percent compared with the end of 2012, domestic news website caixin.com reported the same day.
He also noted that the banking sector is continuing to open up. Chinese banks have now set up nearly 1,400 Chinese-funded financial institutions in 64 countries and regions.
"China's strong economic growth in scale and structure has created large-scale and diversified financial demand, which has stimulated the banking sector," Cheng said.
According to Liu, the improvement is not just restricted to the banking sector. "Positive changes are also taking place in other financial areas like trusts and the yuan," he told the Global Times on Wednesday.
Both Liu and Cheng noted that the active government reforms are a driving force behind these changes.
Cheng said the most influential financial reform in the past five years was the reform of the yuan's central parity exchange rate mechanism, which cut the "invisible tie" between the yuan and the U.S. dollar.
"It was based on the foundation of this reform that the yuan was successfully included into the IMF's Special Drawing Rights (SDR) currency basket in October 2016," Cheng said.
Emerging new finance
Apart from traditional financial sectors, new forms of finance, especially online finance, have also developed quickly in China in recent years.
For example, one popular online finance product, Alibaba Group's payment tool Alipay, now serves over 520 million users and supports settlement in 19 currencies, Alibaba said in a statement sent to the Global Times.
The rise of online payment tools has also led to surging consumption. According to a report from the Xinhua News Agency in March, mobile payment amounted to 157 trillion yuan in 2016, up nearly 50 percent year-on-year.
"The emergence of new finance has injected vitality into the country's financial sector, and has created new ideas about how finance can serve the real economy," Cheng noted.
Higher management requirements
The development of the financial sector has also brought many risks, which means that the regulators must enhance their management standard, Liu said. "They must prevent systemic risks, but should also encourage financial innovation."
Zhou Xiaochuan, governor of the People's Bank of China, the country's central bank, said on October 16 that shadow banking and Internet finance will be two of the areas that will be highlighted in financial management work to safeguard the country's financial stability and development in the future, according to a statement from the central bank.
According to Liu, the risks from shadow banks - non-bank financial intermediaries that provide similar services - have decreased a lot as the government took measures to rein in banks' off-balance sheet businesses.
"There are two difficulties in managing shadow banking risks: how to position the risks and how to coordinate management. This requires further innovation and further improvement of management tools," Cheng explained.
