Speculation over possible financial reforms in China is building
as the opening of a high-profile financial work conference, which
is held every five years and usually heralds significant policy
changes, draws closer.
The third national financial work conference, scheduled for
later this month in Beijing, comes at a time when China faces a
host of new problems: a record high trade surplus of US$177.47
billion in 2006, a huge foreign exchange reserve that exceeds one
trillion US dollars, stagnant domestic consumption and the
possibility of a slowdown of the world economy.
These problems have formed a labyrinth rife with tricks and
traps. A surging trade surplus will force the central bank to buy
back foreign currencies with the yuan, which will increase the
foreign exchange supply. To absorb liquidity, the central bank will
have to raise central interest rates to raise the cost of loans.
However, this will encourage saving, thus further dampening
consumption.
Citing anonymous sources close to the organizers of the meeting,
China Business News said that the central bank, the Ministry
of Finance, the China Banking Regulatory Commission, the China
Securities Regulatory Commission, the National Development and
Reform Commission and the State Administration of Foreign Exchange
had each prepared separate reports based on field research.
The reports will cover financial supervision, rural financial
reform, foreign exchange management, state-owned financial assets
control, the development of the capital market, opening-up of
financing sector, reform of state-owned banks, corporate governance
and the development of the insurance industry, according to the
newspaper.
A more specific agenda reported by the 21st Century Business
Herald included discussions on the shareholders reform of the
Agricultural Bank of China, the last of the "Big-four" state-owned
banks to be listed on the stock exchange, the transformation of the
State Development Bank from a policy bank into a commercial one and
following the deposit insurance system of western countries. The
newspaper also reported that the conference would be held on
January 19 and 20.
Qin Chijiang, secretary-general of the China Financial
Institute, told the newspaper that the meeting would make
breakthroughs in rural financial reforms to alleviate the capital
shortfall in the countryside.
After the first national financial work conference was convened
in 1997, the year a financial crisis swept through Southeast Asia,
China adopted proactive fiscal and financial policies, set up the
Insurance Regulatory Commission and instituted reforms of the "Big
four" banks: the Bank of China, the China Construction Bank, the
Industrial and Commercial Bank of China and the Agricultural Bank
of China.
The second national financial work conference opened in 2002,
signaling the establishment of the China Banking Regulatory
Commission, and the fiscal and financial policies were shifted to
"prudent".
(Xinhua News Agency January 16, 2007)