CHINA’S newly appointed banking regulator vowed Thursday to strengthen supervision of the lending sector, underscoring the government’s determination to fend off financial risks and push forward with reforms this year. Guo Shuqing, making his first public appearance as chairman of the China Banking Regulatory Commission (CBRC), said he’s determined to remove “chaos” from the regulatory system and “safeguard” the health of “the country and the people.” His comments follow remarks by President Xi Jinping on Tuesday, who told top policymakers that the nation must “unswervingly” crackdown on financial irregularities and illegal behavior, while improving its market supervision. Risk prevention is expected to be a key theme at a meeting of China’s parliament starting Sunday, after years of debt-fuelled stimulus led to an explosive growth in debt. China’s regulators are working on new rules to reduce risks in the booming asset management industry, Guo said. He said he will tighten supervision of banks’ wealth management products (WMPs), and curb the expansion of banks’ off-balance sheet business. Chinese investors, lured by high yields and expectations of implicit guarantees by the banks or other financial institutions, have poured trillions of yuan into lightly regulated WMPs, the biggest component of so-called “shadow banking” in China. The value of banks’ outstanding WMPs is close to 30 trillion yuan (US$4.36 trillion), according to CBRC estimates. Guo also warned banks need to “prudently” manage loans to property developers and mortgage lending. The leverage ratio of mortgage loans is not too high, but rapid mortgage growth is a concern, he added. The CBRC will restrict lending that it suspects is being used for property market speculation. China’s banking assets over the last five years have more than doubled, even as the economy has slowed, helping to push the volume of non-performing loans (NPLs) at commercial banks to 1.51 trillion yuan by the end of last year, the highest since 2005. While a sharply higher number of defaults are expected by analysts this year, Guo said progress is being made in reducing heavy corporate debt burdens. (SD-Agencies) |