"Xi Jinping Presides Over Financial Work Conference... Expectation of Strengthened Government Control"

"Concerns Over Local Debt Likely to Prioritize Financial Stability"

Chinese President Xi Jinping presided over the Financial Work Conference in Beijing on the 30th and 31st, which sets the direction for financial policies over the next five years, with Bloomberg reporting on the 30th that authorities are expected to strengthen their control over the financial industry.

Chinese President Xi Jinping [Image source=Reuters Yonhap News]

Bloomberg, citing academics and market analysts, predicted that a key agenda item at this meeting would be measures to strengthen the leadership of the Chinese Communist Party Central Committee. Earlier this year, China had already transferred some supervisory responsibilities over the financial sector from the central bank (People's Bank of China) to the Party.

Former Director of the Survey and Statistics Department at the People's Bank of China, Sheng Songcheng, stated, "The meeting will undoubtedly place the Party Central Committee's leadership in a crucial position over all financial affairs."

Additionally, financial stability is expected to be prioritized to prevent economic recession and real estate market turmoil from spilling over into the financial sector. Bloomberg explained that the Chinese government is likely to try to prevent moral hazard through stringent supervision.

Bloomberg Intelligence assessed, "(This event) could be a landmark event for the financial sector," adding, "The situation in the real estate market, which threatens the financial system, adds urgency."

Liu Xiaochun, Deputy Director of the Shanghai New Finance Research Institute think tank, explained that Chinese authorities are likely to impose more responsibilities on local governments to resolve 'hidden debts' and prevent them from increasing new debt.

The Financial Work Conference is a meeting that determines medium- to long-term policy directions. It was first held in 1997 during the Asian financial crisis and has been held a total of five times to date. The meeting is generally held behind closed doors. The 6th conference was originally scheduled for last year but was postponed by a year due to the COVID-19 situation and is now being held this year.