The Chinese financial sector: reform and development – Opinion
Since the 18th National Congress of the Communist Party of China (CPC), China has made impressive achievements in the financial sector and achieved new rapid growth in the banking and insurance sectors.
A virtuous circle of the real economy and the financial system has taken place. Over the past decade, the average annual growth of bank loans and bond investments has been 13.1% and 14.7%, respectively, roughly matching nominal GDP growth. And the insurance density increased from 1,144 RMB per capita to 3,179 RMB per capita. The critical illness insurance scheme has covered 1.22 billion people in urban and rural areas since its inception in 2012.
The risk protection provided by agricultural insurance for agricultural households has increased from RMB 0.9 trillion in 2012 to RMB 4.7 trillion in 2021. The average annual growth of inclusive loans for small and micro enterprises has been 25.5%, and that of loans to support agricultural production, development of rural areas and agricultural population was 14.9%, both well above the average loan growth. Furthermore, a significant increase was observed in both coverage and accessibility.
The reform and opening up of the banking and insurance sectors has taken on a new face. Continuous efforts have been made to improve the corporate governance of financial institutions and the reform of small and medium banks and rural credit cooperatives has been deepened.
Transforming China’s Foreign Trade
Significant progress has been made in the pilot reform of the pension system, with exclusive commercial capitalization insurance being piloted nationwide. More than 60 billion RMB of retirement wealth products had been subscribed. Over the past ten years, China has adopted more than 50 policies to expand openness in the banking and insurance sectors. In 2021, the capital and total assets of foreign banks in the Chinese market both increased by more than 50% compared to 10 years ago, and those of foreign insurance companies in China respectively increased by 2, 3 times and 7 times.
Many professional banking and insurance institutions, such as foreign wealth management companies and foreign asset management companies, have actively participated in the development of China’s financial market.
Significant progress has been made in preventing and defusing major financial risks. Financial supervision and regulation departments have resolutely taken measures to prevent and resolve financial risks, as the indiscriminate expansion of financial assets has been fundamentally reversed. The high-risk shadow banking sector has been reduced by around RMB 25 trillion from the historical peak, while a total of RMB 16 trillion of non-performing assets have been disposed of over the past decade. Many important risks have been defused and illegal activities in the financial sector have been severely punished.
An environment of strict oversight and regulation has been fostered. China has formulated and revised more than 70 laws and regulations. Substantial results have been obtained in the legal construction of the financial sector. A marked improvement has been seen in the country’s ability to control and regulate in accordance with the law.
So far, the identities of a total of 124 shareholders who have violated laws or regulations have been made public. Through various means, China has severely punished activities violating laws or regulations committed by banking and insurance institutions and responsible persons, to address financial risk prevention and crack down on financial corruption with a systemic approach.
In the future, China will maintain and strengthen the CPC’s overall leadership on finance and resolutely follow the path of Chinese-style financial supervision and regulation.
Copyright Business Recorder, 2022