Business News: China pledges supervision of Fintech, financial holding companies.
China plans to increase oversight of financial holding companies and the fast-growing fintech sector, Premier Li Keqiang said, setting the stage for stricter oversight of giants like Jack Ma’s Ant Group Co over the next five years.
Advances in technology have brought huge changes to the financial sector, wrote Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission and party secretary of the central bank, in an article outlining the regulations over the next five years. It was mentioned in the official Shanghai Securities news.
Chinese policymakers are looking to mitigate internal risks while promoting local champions as the economy opens up further to foreign capital. Fintech has become the new focus of scrutiny since the nation’s leaders pledged in 2017 to clean up $ 53 trillion threats to the financial sector by tackling real estate loans, opaque wealth management products, and peer-to-peer loans that are inundated with fraud.
“We will improve the mechanism for managing financial risks, see responsibilities fulfilled by all stakeholders and ensure that no systemic risks arise,” Li said. “Financial institutions must serve the real economy.”
All three financial watchdogs this year have set themselves the main goal of curbing the push of tech companies into finance, targeting an industry where free supervision has fueled dizzying growth for companies like Ant’s Wechat Pay and Tencent Holdings. Ltd.
In a rebuke to Ant founder Ma, Guo said the key part of the global Basel Accords is to use capital requirements to limit lending and keep leverage in a safe range. “Without adequate capital, financial services will get in trouble sooner or later,” Guo said.
Meanwhile, China will balance its mock campaign with efforts to revive economic growth. The government plans to extend policies that allow small businesses to delay repayments and get financial institutions to further reduce lending rates and forgo profits to help the economy. Big banks are expected to increase their small business lending by 30% this year, Li said.
Lenders were put at the forefront of helping millions of struggling businesses during the pandemic and had to forgo a total of 1.5 trillion ($ 232 billion) in earnings by reducing loan costs and allowing for delayed repayments. This helped China become the only major economy to achieve economic growth last year.
The banking sector recorded a 3% decline in combined profit in 2020, the worst performance in at least a decade, according to official data. Lenders sold off a record 3 trillion yuan in bad loans last year and are under pressure to carve out more tightened credit in 2021 as a payment holiday ends at the end of March. The extraordinary relief measures from the pandemic have concealed the true state of asset quality in the banking sector, which last year saw an unexpected drop in the bad credit rate.