China’s Central Bank to Step Up Efforts to Curb Financial Risks

(Bloomberg) -- China’s central bank will take measures to prevent systemic financial risks from building in the economy as the recovery takes hold, Deputy Governor Chen Yulu said.

Laying out priorities for the next five years, Chen said the People’s Bank of China will improve its macro-prudential assessment framework and strengthen supervision of “systemically important” institutions, businesses and infrastructure.

“The priority of the work is to build a systemic financial risk prevention and control system,” Chen said in an interview with China Business News, which was published on the bank’s website Tuesday. “We will further require shareholders, various creditors and local governments to implement their responsibilities, and work with financial regulatory authorities to maintain the bottom line of avoiding systemic financial risks.”

As the effect of the pandemic subsides and the recovery strengthens, the PBOC is seeking to improve its ability to contain risks in the financial system. It wants to reduce regulatory gaps and improve coordination of financial supervision, Chen said.

In the period covering China’s new five-year plan through 2025, the PBOC will continue opening up the financial sector, which includes freeing up the capital account more and promoting the yuan’s use internationally in a steady and prudent manner, the deputy governor said.

On monetary policy, Chen said the central bank will keep the growth of money supply and aggregate financing in line with the expansion of nominal gross domestic product. It will also seek to improve the money supply mechanism and refrain from flooding the financial system with excess liquidity, he said.

The National People’s Congress, the biggest political gathering of the year, kicked off on March 5, with the government releasing a new five-year plan focusing on boosting technology investment and building a stronger domestic market. The government pledged to remain “prudent” on monetary policy, while “preventing risks” and stabilizing debt levels in the economy.

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With assistance from Bloomberg