Editor’s note: Bruce Pang is chief economist of JLL Greater China. The article reflects the author’s opinions and not necessarily the views of CGTN. It has been translated from Chinese and edited for brevity and clarity.
<img src='https://news.cgtn.com/news/2024-07-30/China-to-improve-financial-governance-in-reform-efforts-1vENrRtOG76/img/040bdf982e0149ef90b172984313acb1/040bdf982e0149ef90b172984313acb1.png' alt='People's Bank of China, Beijing, May 14, 2024./CFP'
In recent years, China’s financial sector has seen continuous advancements in practical innovation, theoretical innovation, and institutional innovation. As a result, new situations and demands have emerged across various aspects, such as financial regulatory bodies, market participants, and financial activities.
It is imperative to enhance the positioning and governance of financial institutions and establish a well-designed system characterized by division of labor and cooperation. This will help financial institutions adhere to their missions, return to their fundamentals, identify their positions, and complement each other’s strengths, thereby significantly enhancing their competitiveness and service capabilities.
Accurate positioning, effective governance, and collaborations among financial institutions involve clarifying roles, strengthening cooperation, and pursuing coordinated development. This optimizes the allocation of financial resources and encourages financial innovation. It also promotes the accumulation of incremental resources while revitalizing existing financial resources. Furthermore, it contributes to improving the stability of the financial industry’s operations and the competitiveness of its products and services, better meeting society’s needs for diverse, comprehensive, and convenient financial services.
<img src='https://news.cgtn.com/news/2024-07-30/China-to-improve-financial-governance-in-reform-efforts-1vENrRtOG76/img/9f5601a0488b4a16976c33b2fca3ba21/9f5601a0488b4a16976c33b2fca3ba21.png' alt='Logo of China Banking Regulatory Commission (CBRC), Beijing, March 14, 2023. /CFP'
From the supply perspective, a financial institution system with accurate positioning and role-specific collaboration guides various market-oriented operational financial institutions to clarify their roles and business boundaries, explore business differentiation and competitiveness, better leverage the unique industrial and regional advantages, offer extra support to key areas, and improve services in weak links.
From the regulatory perspective, this also helps maintain the stable operation of financial markets, better coordinate mixed operations with the separate regulation system, steadily advance financial reform and opening up, and prevent financial risks. In particular, it can reinforce centralized and unified supervision, strengthen management by level and category, and enhance regulation.
At present, various financial institutions are, to some degree, confronted with issues such as unbalanced and inadequate development, insufficient international competitiveness and influence, and subpar quality and efficiency in serving the real economy. Only by clarifying their roles, focusing on core businesses, and honing their capabilities, can financial institutions leverage their respective strengths to develop financial control tools, solidify the foundation of financial markets, improve the quality and efficiency of financial regulation, and provide more diverse and professional financial products and services. This requires state-owned financial institutions, whether large or small and medium-sized, to complement each other.
<img src='https://news.cgtn.com/news/2024-07-30/China-to-improve-financial-governance-in-reform-efforts-1vENrRtOG76/img/d1016be90c1a46498aaa593f842246c7/d1016be90c1a46498aaa593f842246c7.png' alt='Shanghai Stock Exchange, Shanghai, October 8, 2020. /CFP'
Large state-owned financial institutions should enhance their key positioning and responsibilities, shifting their focus from “becoming bigger” to “becoming better and stronger.” They should serve as the main force in supporting the real economy, the leader in building a financially robust country, and the anchor in maintaining financial stability. They should provide premium financial services with a focus on major strategies, key areas, and weak links. By cultivating and improving their own specialties and strengths, they can receive preferential policy support, prioritized resource allocation, and efficiency guarantees, thereby providing more efficient and adaptable funding support for the real economy.
Small and medium-sized financial institutions should pay utmost attention to risks and resolve them timely. It is particularly important to balance the reform and risk mitigation efforts for small and medium-sized financial institutions in the development process and steadily dispose of high-risk small and medium-sized financial institutions. Facing the existing issues in financial services, such as suboptimal product structures and unbalanced regional development, it is crucial to address challenges faced by small and micro enterprises, private enterprises, and agriculture-related enterprises in financing coverage, accessibility, and convenience. By steadily and orderly developing new models and new business forms for small and medium-sized banks, local financial institutions, and non-bank financial institutions, it is possible to address issues such as the financing constraints and high costs faced by individuals and enterprises and fill the gaps in financial coverage, product supply, and service, among others.
