The five yearly Finance Work Conference, led by the State Council, drew to a close on 15th July and the much-anticipated meeting met market expectations of a regulatory overhaul, with the establishment of a committee to co-ordinate financial policies, strengthen accountability and implement functional (and conduct-based) regulations, explains the research team at HSBC.
“The PBoC, which will assume greater responsibility for macroprudential policy and systemic risk prevention, will likely play a key role at the operational level of the committee. The meeting also highlighted the need to deleverage State-Owned Enterprises in order to reduce economy-wide leverage. The overall tone emphasised the need for the financial system to better serve the real economy. It suggests that monetary policy will be prudent in order to protect the nascent economy recovery, and that policy makers will seek to address structural weakness in the financial system through deeper institutional reforms. The meeting also reaffirmed commitment to RMB exchange rate reforms and capital account liberalisation. The RMB should see greater flexibility – strength in the near term before USD rebound later in the year.”