We should correctly understand, guard against and defuse major financial risks

2022-05-05 0 By

The Central Economic Work Conference to be held at the end of 2021 pointed out that “as China enters a new stage of development, profound changes have taken place in the internal and external environment of development, and China faces many new major theoretical and practical problems, which need to be correctly understood and grasped.” One of them is to “correctly understand and grasp the prevention and defusing of major risks.”Financial risk is the main content of major risks, therefore, the meeting proposed “to continue in accordance with the overall situation of stability, overall planning and coordination, classified policy, precise bomb disposal, risk management work, strengthen the construction of financial rule of law, compaction of local, financial supervision, industry supervisors and other parties, compaction of enterprise self-help responsibility.We should strengthen capacity building and strengthen the contingent of financial supervision officials.To defuse risks, we should have sufficient resources, study and formulate policies to defuse risks, and cooperate extensively to improve the financial risk disposal mechanism.”Preventing and defusing major financial risks, especially systemic financial risks, is the core task and eternal theme of financial work.Focus on finding all kinds of financial risks and hidden dangers of financial activities, economic activities;Financial stability and economic stability.Economic prosperity, financial prosperity;Strong economy, strong finance.Economy is the body of the economy, and finance is the blood of the economy.Financial development level is an important index to measure the core competitiveness of a country, and financial security is an important part of national security.Financial risks often lurk for a long time and finally break out in a blink. The outbreak of the SUBPRIME mortgage crisis in the United States happened overnight.If we fail to improve the ability of risk prediction and risk prevention, the possibility of risk outbreak in the financial field always exists.Since the launch of reform and opening up, the CPC has always attached great importance to properly handling the relationship between reform, development and stability, and has always taken safeguarding national security and social stability as an important basic task of the Party and the country.International environment under the new situation, profound and complex changes continuously, the challenge for the national security, we must in time of peace prepare for war, strengthen the suffering consciousness, risk consciousness, responsibility consciousness, keep a clear mind, “the figure to sprout, about to no”, strive to resolve the financial sector is outstanding contradictions and problems, effectively prevent various potential risks, and strive to not appear significant risk,Or we can withstand and live with major risks when they arise, safeguard national security, and provide sound financial support for comprehensively building a modern socialist country.At present, systemic risks in China’s financial sector are generally under control, but hidden dangers such as shadow banking risk, external shock risk and Internet finance risk still exist. Improper handling will seriously affect the healthy development of the financial market and even trigger systemic financial risks.We must actively yet prudently guard against and handle prominent risks, neither ignore any risk nor let go of any hidden danger, and nip them in the bud to ensure the safe, efficient and steady operation of the financial system.In the short term, attention should be paid to the following aspects: First, to prevent the mutual infiltration of real estate enterprises and financial institutions, so that economic growth, fiscal revenue, bank assets and profits become highly dependent on the real estate industry.Second, we will prevent chaos in the financial market and strictly investigate and punish illegal fund-raising, illegal leverage, illegal arbitrage and other activities that seriously disrupt the financial market.Third, traditional financial risks and new types of financial risks in the context of Internet finance are prevented from overlapping and emerging simultaneously, resulting in resonance effects.Fourth, prevent financial corruption and financial risks from intertwining and disturbing the order of the financial market.Fifth, the us dollar as a core reserve currency to prevent the risk of external shocks.We will guard against and defuse major financial risks and strengthen the rule of law in the financial sector.We will focus on cracking down on illegal arbitrage and other activities that seriously disrupt the order of the financial market, strengthen supervision over Internet finance, strictly regulate transactions in the financial market, and strictly regulate comprehensive financial operations and the combination of industry and finance.We will strengthen control of the source of financial risks, strictly control market access, strengthen the responsibility of financial institutions to guard against risks, and strengthen the development of a social credit system.We will resolutely ban illegal financial institutions and continue to crack down on illegal fund-raising activities.Compaction of local, financial regulators, industry supervisors and other responsibilities.First, we will resolutely curb the growth of hidden local government debt.Local governments should speed up the transformation of their development philosophy, standardize borrowing through government bonds, and properly determine the scale of bond issuance to ensure fiscal sustainability.Second, we will strengthen financial supervision and regulation.One of the fundamental characteristics of finance is the existence of large externalities. Eliminating or reducing externalities depends on strict financial supervision. Standards should not only be strict, but also be unified.In the context of digital economy, it is also necessary to cultivate a number of technology-oriented financial regulatory talents, improve the level of supervision, and reduce the “blind spots” of supervision.Finally, we should reduce the leverage ratio of soes and strengthen the constraints on their assets and liabilities.We will clarify the relationship between the government, banks and state-owned enterprises, and give full play to the role of capital markets and various financial institutions in enterprise mergers and reorganizations.Reducing the leverage ratio of soes should be combined with promoting the reform of mixed ownership of soes, so as to put existing assets to good use and optimize incremental assets.We will promote the steady and sound development of the real estate market.We will establish a long-term mechanism for the sound development of the real estate market, and adhere to the position that “houses are for living in, not for speculation.”We will pay more attention to the management of the demand side and guide expectations. At the same time, we will improve the land supply system and adopt a more scientific way of land supply to prevent drastic fluctuations in housing prices.In line with supply-side structural reform, we will improve the housing supply system, effectively adjust the supply structure, and increase the supply of rental housing in major cities where conditions permit in a variety of ways.We will actively promote real estate tax reform.Building a modern central banking system.Building a modern central bank system is a major task to modernize China’s governance system and capacity.Under the modern credit monetary system, if the central bank manages money well, it can play a positive role in allocating resources across time and space, and promote the sustainable and healthy development of economy. Otherwise, it will either lead to inflation and asset bubbles, credit contraction, or even economic and financial crisis.Current our country is in the transformation of the mode of development, optimizing the economic structure, transformation, growth, and strive to achieve high quality growth GongJianQi, need to modern central bank system, as an important support, supports both economic transformation and upgrading, and prevent a serious inflation or deflation cause systemic financial risk, ensure smoothly promote the process of our modernization drive, safeguard national economic security.First, we need to improve the money supply regulation mechanism, resolutely implement a prudent monetary policy, firmly control money and credit, and prevent a rapid rise in macro leverage.Deleveraging is the key to preventing systemic financial risks.Monetary policy should strike a balance between maintaining steady growth, adjusting the economic structure and controlling aggregate supply. It should not only maintain stable economic performance and improve the quality and efficiency of development, but also prevent excessive loose money supply from increasing systemic financial risks.Second, we need to steadily internationalize the RMB and keep its exchange rate flexible.China will enhance its capacity to participate in international financial governance, take an active part in formulating international financial rules, strengthen cooperation with international organizations, and promote the establishment of a diversified and stable international monetary system.Third, we will establish a system for preventing and controlling systemic financial risks.As the lender of last resort in the financial system, the central bank must earnestly fulfill its responsibility to prevent and control systemic financial risks throughout the whole process.We will improve the macro-prudential management system, avoid the spread of financial risks across institutions and markets, strengthen overall supervision over systemically important financial institutions, financial holding companies and financial infrastructure, and gradually bring major financial activities, financial markets, financial institutions and financial infrastructure under macro-prudential management.We will strengthen the mechanism for coordinating financial regulation and leave no gaps in microprudential oversight.We will increase the proportion of direct financing.Deepening the supply-side structural reform of the financial sector should focus on the structural adjustment and optimization of the financial system.China’s financing structure has long been dominated by indirect financing, with credit assets accounting for more than 70% of total financial assets.Raising the proportion of direct financing will help stabilize macro leverage and better guard against and defuse financial risks.First, we will fully implement the registration system for stock issuance and expand the access to direct financing.The reform of registration system is an important part of capital market reform and a key measure to increase the proportion of direct financing.We will steadily introduce a registration system centered on information disclosure across the market, comprehensively promote the reform of the basic systems for issuance, listing, trading, and continuous supervision, and urge all parties to return to their respective roles and responsibilities. We will make the market pricing mechanism more effective, truly leave the choice to the market, and support more high-quality enterprises in seeking financing in the capital market.Second, we will improve the multi-tiered capital market system and make direct financing more inclusive.We will develop a multi-tiered capital market system to meet the differentiated financing needs of enterprises of different types and stages of development, and make services more inclusive.Third, we will encourage listed companies to improve their quality.The group of high quality listed companies is the cornerstone of the healthy development of capital market.We will encourage listed companies to reform and improve corporate governance, increase the transparency of information disclosure, better leverage the exemplary role of innovation leaders and industry pacesetters, and encourage more enterprises to achieve high-quality development through direct financing.Gao Xinwei is a researcher at the Research Center for Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, Party School of the CPC Central Committee (National School of Governance)