Wang Hui: Injecting New Energy into Global Financial Stability Financial Regulation | Finance | Wang Hui
Currently, financial risks frequently gather and manifest in various forms in multiple countries or regions, becoming an important source of risk threatening the global financial system. The report of the 20th National Congress of the Communist Party of China clearly requires "strengthening the financial stability guarantee system, lawfully incorporating all types of financial activities into supervision, and guarding the bottom line of preventing systemic risks.". In this context, China has taken a positive attitude and systematic measures to deepen the reform of its financial regulatory system, effectively adapt to the new situation, new formats, and new demands of economic and financial development under the "two major situations", safeguard the new development pattern with a new security pattern, and inject new momentum into global financial stability on the basis of ensuring China's financial stability.
Global financial stability cannot be separated from China's financial stability
The unstable global financial market poses enormous risks to the development of the world economy, becoming a stumbling block to economic recovery. The 2008 international financial crisis exposed the inadequacy of financial regulatory systems in some countries, leading to significant global financial turbulence and long-term economic recession. Currently, economic globalization is facing a backlash, financial risk events are frequent, and global financial instability is increasing. The spread of the UK pension crisis has caused turbulence in the gilt and pound markets; The banking crisis in Europe and America continues to ferment, and deep contradictions continue to emerge; Suspicions of US bond defaults are frequent, constantly overdrawing US credit and further increasing financial market uncertainty.
The Global Financial Stability Report released by the International Monetary Fund in April warns that as the resilience of the global financial system is tested by higher inflation and fragmentation risks, financial stability risks are rapidly increasing. The global financial system is an interdependent system, and the financial stability of various countries is interrelated. China's financial stability is crucial to the stability of the global financial system.
Firstly, the stability of China's financial environment is an important guarantee for the smooth progress of global trade. China is the second largest economy in the world, an important engine of global economic recovery, an important participant in global trade, and a crucial link in the supply chain. The financial stability of China is closely related to the smooth operation of global trade and supply chains. Once there are problems in the Chinese financial market, it will affect global commodity prices, international payments, and global supply chain stability.
Secondly, a stable financial environment in China is an important prerequisite for improving the quality of foreign investment. On the one hand, China actively promotes the opening up and internationalization of its financial market, attracting a large amount of foreign investment and capital inflows; On the other hand, China actively promotes the joint construction of the "the Belt and Road", vigorously promotes international trade and foreign investment, and capital flows and international investment have a profound impact on the global financial market.
Thirdly, the stability of China's financial environment is a key element in promoting global cooperation and coordination. China plays an important role in international financial cooperation and actively participates in international financial organizations and multilateral financial cooperation mechanisms.
To safeguard the high-quality development of China's finance
Guided by the spirit of the 20th National Congress of the Communist Party of China, optimizing and adjusting institutional responsibilities in the field of financial supervision, and systematically deploying around strengthening and improving modern financial supervision and financial stability guarantee systems, is not only an important manifestation of strengthening the Party's centralized and unified leadership in financial work, but also an inherent need to improve the modern financial supervision system, and an inevitable requirement to use financial security to promote high-quality economic development.
One is to strengthen the regulatory firewall, strengthen behavioral supervision, and protect financial consumers. After reform and adjustment, a regulatory model has been formed that maintains financial stability and prevents systemic risks through macro prudential supervision, and strengthens consumer protection through market regulation to regulate the behavior of financial institutions. For example, after the establishment of the State Administration for Financial Supervision and Administration, it focused on the solvency of the insurance industry, strengthened functional and penetrating supervision of insurance companies, formed a hard constraint on solvency, and promoted high-quality development of the insurance industry.
The second is to have clear regulatory powers and responsibilities, forming a joint regulatory force. Clearly, the newly established State Administration for Financial Supervision and Administration is responsible for overall protection of the rights and interests of financial consumers, and is responsible for daily supervision of financial holding companies and other financial groups. Deepening the reform of the local financial regulatory system, the financial regulatory agencies established by local governments are responsible for regulatory responsibilities with clear rights and responsibilities, which will effectively play the role of financial regulation.
The third is to establish a modern central banking system and improve the modern financial regulatory system, reducing policy conflicts among diverse objectives. After reform, the central bank has focused on monetary policy and macro prudential functions, the State Administration for Financial Supervision and Administration has coordinated micro prudential supervision and behavioral supervision functions, and the China Securities Regulatory Commission's capital market supervision responsibilities have been further strengthened. Macroeconomic regulation and financial regulation are relatively separated to perform different functions, each performing their own duties and minimizing policy conflicts among diverse objectives.
The fourth is to streamline the relationship between central and local authorities in financial supervision, and comprehensively enhance the strength of financial supervision. Establish a local financial supervision system with the central financial management department and local dispatched agencies as the main body, optimize the allocation of resources, avoid excessive intervention by local governments on local financial institutions, strengthen the central government's efforts in risk prevention and resolution, and combat financial crimes. At the same time, reallocate and strengthen regulatory resources, effectively solve the problems of lack of local regulatory means and shortage of professional talents.
Beneficial for maintaining global economic and financial stability
China's financial regulatory reform has attracted widespread attention worldwide, but there are also politicians who take advantage of the situation. For example, US lawmakers have proposed the 2023 China Financial Threat Mitigation Act, which requires an assessment of any risk impact of China's financial sector reforms on the US and global financial system.
Under the name of "de risk" and the practice of "de sinicization", it completely disregards objective economic laws, which not only goes against the current increasingly complex and resonant world economic and financial situation that requires coordination and cooperation among countries including China, but also ignores the fact that a sound Chinese financial regulatory system will become the strongest stabilizer of the global economy and finance.
Firstly, reducing policy conflicts with multiple objectives can effectively prevent systemic financial risks and resolve conflicts with the development goals of the real economy, providing important reference for policy arrangements for countries around the world. During the pandemic, the Federal Reserve's "helicopter throwing money" became the culprit of high inflation. In the later stages of the pandemic, ignoring the objective domestic environment, continuous interest rate hikes worsened the liquidity of European and American banks, exacerbating financial instability. From this, it can be seen that policy arrangements lacking systematic concepts will only fall into difficulties. China's deepening of financial regulatory system reform has important reference significance for the economic and financial policy arrangements of countries around the world.
Secondly, establish a sound investor protection system and continuously improve the financing function of the capital market, creating a healthier "safe haven" for investors. On the one hand, the State Administration for Financial Supervision and Administration is responsible for coordinating the protection of financial consumer rights, including investor protection, which will effectively improve the behavioral norms and integrity of market participants, and reduce manipulation and improper behavior in the financial market. On the other hand, strengthening the ability of direct financing to serve high-quality economic development will make China's capital market healthier and more stable, which will help improve the efficiency and stability of the global financial market.
Thirdly, continuously improve the modern financial regulatory system and promote international cooperation and coordination towards a new stage. On the one hand, the new regulatory system is more adaptable to the new situation of financial development. China will actively participate in international financial regulatory mechanisms, continuously establish multi-level and extensive cooperation mechanisms with financial regulatory agencies of other countries, and jointly respond to cross-border financial risks. On the other hand, China continues to reform and optimize its financial regulatory model based on its own national conditions, which also provides useful experience and inspiration for developing countries to continuously improve their own financial regulatory system.
