(Economic Observer) “Top leaders” in China’s financial sector focus on responding to hot issues

On October 18, 2024, the Financial Street Forum Annual Conference kicked off in Beijing, featuring key figures from China’s financial sector addressing pressing concerns about the country’s economic landscape and financial market trends.

When asked about striking a balance between investment and consumption, Pan Gongsheng, the Governor of the People’s Bank of China, explained that historically, during economic downturns, China has primarily relied on expanding investment and maintaining supply-side capacity. However, in a phase of high-quality development, he emphasized that investment should fluctuate according to economic structural adjustments, with a greater focus on technological innovation and fundamentals related to people’s livelihoods.

He pointed out the need to increase household incomes, optimize fiscal expenditure, enhance the social security system, and stimulate consumption to create a virtuous cycle: “Government nurtures consumption, consumption activates the market, the market drives enterprises, and enterprises expand investment.”

Pan also highlighted a significant shift in macroeconomic policy focus from an emphasis on investment to a balanced approach that gives equal weight to both consumption and investment.

Addressing the question of stabilizing the real estate market, Li Yunze, head of the China Banking and Insurance Regulatory Commission, called for expedited improvement of the urban real estate financing coordination mechanism. He stressed the importance of ensuring that financing reaches those who need it and that banks effectively utilize both policy and commercial financial tools to revitalize unused land and reduce housing inventory.

Li added that risks in key sectors are being systematically addressed, with the banking and insurance industries maintaining steady operations and overall risks being controllable. He underscored the need for a structured approach to reforming small and medium-sized financial institutions, managing risks without spillover, and enhancing interest rate transmission and asset-liability management to counter compressing net interest margins.

On the topic of shareholder reduction of holdings, Wu Qing, Chairman of the China Securities Regulatory Commission, stated that objective data shows no widespread or illegal reduction of holdings by listed companies in the past year or since late September.

Regarding reports of individual companies engaging in improper reductions, Wu confirmed that the regulatory bodies took immediate action against such violations. He reaffirmed that while shareholder rights must be respected, any illegal actions should be firmly addressed, including buybacks, remitting price differences back to the market, and holding violators accountable.

Looking ahead, he noted that there would be a reinforced regulatory chain covering major shareholders, actual controllers, and their financial advantages, ensuring strict oversight on activities like share reductions and delistings to protect the rights of small investors and promote a more organized financing environment.

As for foreign direct investment, Zhu Hexin, Vice Governor of the People’s Bank of China and head of the State Administration of Foreign Exchange, observed that since the second half of this year, improvements in both internal and external environments have led to a stabilization and recovery in the foreign exchange market, a rebound in the RMB against the USD, and heightened foreign enthusiasm for RMB asset investments.

He predicted that the robustness of cross-border capital flows is likely to strengthen as China continues to deepen reforms in foreign investment management and promote dual-direction financial market openness, thereby facilitating balanced cross-border capital flows.

Zhu also expressed confidence that the resilience of the foreign exchange market would increase, with the RMB exhibiting enhanced two-way fluctuations. This would better serve as an automatic stabilizer for both macroeconomic adjustments and international balance of payments, as corporate awareness and capabilities in managing exchange rate risks improve, alongside greater utilization of RMB in cross-border transactions to adapt to changes in the external environment.