China’s government announced plans Tuesday to create a newly powerful regulator to oversee scandal-plagued banking and insurance industries as they try to reduce debt and financial risks.
The move is in line with the ruling Communist Party’s efforts to tighten control over state-owned entities that dominate industries, including banking, telecoms and energy, in an effort to make them more efficient and productive, AP reported.
The party’s stated priorities this year include reducing financial risk following a runup in corporate and local government borrowing that prompted global rating agencies to cut Beijing’s government credit rating last year.
The new agency, a merger of separate Cabinet bodies that oversaw banks and insurers, will be charged with “preventing and dissolving financial risks,” said the plan was submitted to the ceremonial national legislature for endorsement.
Beijing has launched a series of regulatory overhauls over the past two decades, creating and merging agencies, to respond to the growth of China’s vast, state-owned banking, insurance and finance industries.
The division of responsibility among multiple agencies prompted concern finance regulators were failing to keep track of increasingly complex financial activity by banks, insurers and companies.
The insurance industry has been shaken by February’s takeover by regulators of Anbang Insurance Group, one of China’s biggest insurers, and the arrest of the top regulator on graft charges. Other insurers face complaints they indulged in reckless speculation in stocks and real estate.
Industry analysts contend banks are using financial tools that obscure their levels of lending and risk. Some major companies that have run up multibillion-dollar debts to banks face pressure to pay those down while others face questions about their solvency.
The latest change would bring together the China Banking Regulatory Commission and the China Insurance Regulatory Commission. The plan made no mention of the third financial agency, the China Securities Regulatory Commission.
The revamp is a cornerstone of President Xi Jinping’s agenda to put the leadership of the ruling Communist Party squarely at the heart of policy with Xi himself at the core of the party, Reuters said.
The economy and the party have become ever more intertwined since the once-in-five-years party congress in October when Xi consolidated his grip on power, with party control deemed necessary to help push through reforms. On Sunday, presidential term limits were removed from the state constitution.
“Deepening the reform of the party and state institutions is an inevitable requirement for strengthening the long-term governance of the party,” Liu He, Xi’s top economic adviser and confidante, wrote in a commentary in the official People’s Daily.
