PBoC chief: Protectionism hurts China’s financial sector, opening helps

Healthy financial institutions are a prerequisite for preventing a financial crisis and further opening will help build a strong and competitive financial sector, People’s Bank of China (PBoC) Gov. Zhou Xiaochuan said on Tuesday.
Speaking at an annual forum in Shanghai, Zhou focused on broad reforms and competition but did not discuss more immediately pressing policy challenges like managing the yuan exchange rate or balancing efforts to “de-leverage” the economy and encourage growth.
He said some people keen to limit foreign participation in the financial sector were “focused on their own interests” and not doing Chinese financial institutions any favors.
“From the experience of many countries, including our own, protections will lead to laziness and weakness... protectionism will lead to weak competitiveness and will hurt the industry’s development, and (make for) unhealthy and unstable markets and institutions,” he said.
The financial services industry had benefited from opening up and must continue to do so, he said at the start of the Lujiazui Forum in China’s finance hub.
While the government has opened parts of the financial sector to foreign participation, non-Chinese firms still face a range of restrictions on both investment and business.
Analysts say the risks to China’s financial sector and the broader economy have grown as debt has soared.
Maintaining healthy financial institutions was key to defending against a financial sector crisis, Zhou said.
As part of efforts to lift the yuan’s status as a globally significant currency, China’s long-planned international payment system for cross-border yuan settlement would “soon” be based in Shanghai, Zhou said.
The China International Payments System, or CIPS, would replace a patchwork of networks and allow hassle-free yuan payments.
China has been keen to turn the yuan into a global currency but its efforts have been stymied by a string of capital control measures aimed at easing depreciation pressure in recent months.
The yuan lost about 6.5 percent of its value against the dollar last year and economists had expected further depreciation this year, but capital controls, a weaker dollar and other steps by the authorities have bolstered the value of the Chinese currency.
The ranks of China’s wealthy will again grow by double-digits this year but industry expansion will cool as economic growth slows and government oversight of financial products increases, a report said on Tuesday.
The 2017 China Private Wealth Report, by Bain Consulting and China Merchants Bank, put the number of high-net-worth individuals (HNWI) — with at least 10 million yuan ($1.47 million) of investable assets — at 1.6 million in 2016, nearly nine times the number a decade earlier.
The report, issued every two years, forecasts a slower growth pace for the wealth business this year, but still sees substantial gains.
It projects an 18 percent increase in HNWIs to 1.87 million by the end of 2017 and a 14 percent increase in China’s private wealth market to 188 trillion yuan from 165 trillion yuan. In 2014-2016, the market grew 21 percent annually, the survey said.
“Some asset classes like real estate are likely to have a larger impact on the slowing growth rate,” Liu Xin of Bain Consulting told reporters, adding that increased regulation and oversight of investment products including property, wealth management products and insurance will contribute to the slowdown.

Source: Arab News