context: Since the first meeting in 1997 in response to the Asian Financial Crisis, the Central Financial Work Conference has met every five years to plan key financial planning tasks. Previous meetings have focused on creating a modern financial regulatory system to serve the PRC’s economic modernisation. This year’s meeting comes as the country faces a declining real estate sector, highly-leveraged local governments and efforts to increase funding future industries.
The Central Financial Work Conference was held from 30-31 October 2023 in Beijing and attended by all seven Politburo Standing Committee members. The first meeting since 2017, the conference identified finance as the ‘lifeblood’ of the economy, and was focused on creating high-quality development in the financial system while stabilising risk. Central problems outlined included
- high levels of hidden financial risk
- inefficient service to the real economy
- continued corruption and disorder
- weak financial management and governance
Front and centre is the Party’s role in financial leadership, including the importance of provincial- and local-level Party institutions. Marxist analysis of finance is to anchor planning. Party leadership will be embodied in the new Central Financial Commission announced in March, which has already hired staff, opened its office and begun sending personnel to important meetings at the PBoC (People’s Bank of China) and the major commercial banks, reports 21st Century Business Herald.
The conference outlined the necessity of creating a long-term debt management mechanism, in contrast to the waves of local government debt resolutions that have emanated from the centre. Regulation must be more comprehensive and ‘piercing’, adapting to the financial industry’s rapid development. The meeting identified five high-risk areas
- SMBs (small and medium banks)
- local government debt
- real estate
- financial markets
- foreign exchange markets
Dealing with risk includes restructuring real estate. State-owned and private developers are to have equal access to financing. The meeting mentioned for the first time creating a virtuous cycle between real estate and finance, as well as setting up oversight for real estate firms as market actors and their finances, contends Yan Yuejin 严跃进 E-Housing China Research Institute research director.
Finance should flow to the real economy, including advanced manufacturing, SMEs (small and medium enterprises) and innovation. Five sectors emerged as the centre’s key targets for financing, to be served by encouraging the development of diversified funds, large state-owned financial institutions and capital markets
- technology
- green projects
- inclusive finance
- elderly finance
- digital economy