context: One of the 'three battles’, financial risk prevention is a key macroeconomic priority for the state. Financial opening up, monetary policy reorientation, and controlling local government debt are all designed around this central initiative. After substantial groundwork, the 13th 5-year plan calls for modernising the financial system, which not only contributes to stability but reveals the state’s ambition to be a global finance powerhouse.
The 13th 5-year plan on modernising the financial sector is of great significance; an overarching document, it delineates the development structure for the financial sector over the next five years, says Dong Ximiao 董希淼 Renmin University Chongyang Institute of Financial Studies senior researcher. According to Dong, a modern financial system requires supply-side structural reform in the sector by
- adjusting resource supply towards clients in line with policy orientation to enhance accuracy and efficiency
- innovating product lines and use interest rates, maturity, and quota to meet market needs
- accelerating non-performing asset disposal
- improving breadth and scope of financial services
Making macro-prudential assessment (MPA) one of the two pillars signals the elevated importance of financial stability. MPA policies have been implemented in full force over the past two years, says a finance scholar. MPA has become a prevalent central banking practice in major economies since the 2008 financial crisis, says Wen Bin 温彬 Minsheng Bank chief researcher. After its top-level mention in the 19th Party Congress report, the MPA and monetary policy dual pillars are again specified in the 5-year plan as the direction for financial regulation and macro-adjustment, adds Wen.
The 5-year plan focuses on seven prominent risks, reports Caixin, including
- liquidity shortage
- non-performing assets and implicit liabilities
- bond defaults
- abnormal volatility in equity and futures
- real estate bubbles
- illicit cross-border capital flows
- attacks on financial cyber infrastructure and information theft
The 5-year plan incorporates the newest developments in financial regulation and reform, and 90 percent of its proposals are already being implemented, say experts to Caijing.