President Xi backs stronger risk-reduction rule for China central bank

Chinese President Xi Jinping said the central bank will play a stronger role in defending against risks, calling for more work on safeguarding the financial system and modernising its regulatory framework.

China will set up a Financial Stability Development Committee under the State Council, Xi said at a twice-adecade National Financial Work Conference held July 1415, state media reported without defining the relationship with the People's Bank of China. Financial security is part of national security, and finance should better serve the real economy, Xi said.

In a speech, Xi said prudent monetary policy, a goal announced in December, should be firmly implemented and the PBOC should take a stronger macro-prudential policy role. He also called for greater yuan exchange-rate reform, an improved foreign-exchange market system, and steady progress in yuan internationalization, according to state media reports.

Xi is ramping up efforts to en sure stability ahead of a twice-a-decade leadership transition this fall at the 19th Communist Party Congress. He has elevated curbing risk in the $40 trillion financial industry to a new level with “strategic importance“ amid increasingly intertwined business between China's banks, brokerages, asset managers and insurers.

Establishing the committee is noteworthy, though the meeting didn't produce much surprise, according to Ming Ming, a former PBOC monetary policy official who's now head of fixedincome research at Citic Securities Co. in Beijing.

The name signifies that the panel should be a ministry-level entity directly under the State Council that's mandated to oversee overall financial coordination, he wrote in a report Sunday.

China will proactively prevent and resolve systemic financial risks, and step up efforts to reduce leverage in the economy, the official Xinhua News Agency reported, citing Xi.