Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said he was worried about risks from a bubble in global finance and China’s property market. He also warned that the U.S. and European markets could be in a bubble, that their gains were moving in the opposite direction from their underlying economies and would sooner or later face a correction.
Mr Guo’s comments came as Asian stock markets tumbled, with the MSCI Asia Pacific index erasing early gains. China’s CSI 300 index fell 1.4 per cent, while Hong Kong’s main index fell almost 1 per cent as Chinese government bonds profited from a flight to safety, sending yields on benchmark 10-year government bonds to a near three-week low.
Mr Guo said regulators were looking at money flowing into China and that the size and pace of such inflows could be controlled despite the country’s continued economic growth and high interest rates. The China Banking and Insurance Regulatory Commission is also exerting pressure on the fintech industry. Taking risk prevention as the eternal theme of the financial industry, it will monitor and defuse all kinds of financial risks, strengthen the financial rule of law and improve the long-term mechanism.
He also called for deeper reform of the financial market and institutions and higher levels of financial openness. He said the government will intensify the fight against corruption in the financial sector, strengthen internal management and self-improvement, and build a loyal, clean and responsible regulatory army.
In addition, data from the China Banking and Insurance Regulatory Commission show that the financial leverage ratio has dropped significantly, and the blind expansion of financial assets has been fundamentally reversed. From 2017 to 2020, the total assets of the banking industry and the insurance industry grew at an average annual rate of 8.3% and 11.4% respectively, only 50% of the average annual growth rate between 2009 and 2016.
In view of the recent trend of China’s housing market, Guo Shuqing believes that the core problem in the real estate sector is still a large bubble, and the tendency of financial bubbles is strong. “Many people buy houses not for living, but for investment speculation, which is dangerous,” he said. But in 2020, for the first time in eight years, the growth rate of real estate loans is lower than that of all other loans. This achievement is hard-won, and I believe the real estate problem can be gradually alleviated.”
“China’s economy is closely linked to other countries’ economies, and the inflow of foreign capital into China will increase significantly. China and the United States have a large interest rate differential, inflows are inevitable. “The scale and speed of foreign financial capital inflows are still under control, and China is studying more effective ways to prevent excessive volatility in financial markets while encouraging the opening of cross-border capital flows.” “Guo added.
He also pointed out that many US interventions in China’s internal affairs, such as Hong Kong and Xinjiang, are unreasonable and untenable, and he is firmly opposed to them. Neither the CBRC nor the banking industry will enforce US laws and regulations, but they are willing to work with US companies and financial institutions. Chinese and foreign investors in Hong Kong must abide by Hong Kong’s laws and regulations, he said, noting that China would not enforce the US sanctions as they were non-binding.
In response to market concerns about whether foreign investment in China will cause much disruption and damage to the financial market, Guo Shuqing said: “Foreign investment in China is in accordance with Chinese laws, and foreign banks in China this year accounted for only 1%, the impact is limited, we will continue to encourage foreign investment in China for common development.”