China has introduced draft revisions to its new financial stability law, aimed at enhancing provisions for the prevention and control of financial risks. These revisions are currently undergoing a second review by the National People's Congress (NPC) standing committee and are open for public feedback until July 27th, as per the NPC website.
The proposed bill seeks to create a comprehensive, cross-agency framework for detecting and mitigating risks within the financial system. This comes at a time when China is facing a prolonged real estate crisis and vulnerabilities in smaller banks.
Typically, the NPC passes bills after three rounds of review.
The latest revisions mandate that financial regulators and local governments must actively prevent, mitigate, and address financial risks, as well as investigate and curb illegal financial activities.
The establishment of financial institutions and engagement in financial activities will require approval from government financial departments, according to the draft.
Additionally, the draft removes references to the Financial Stability and Development Committee (FSDC) under the State Council. Instead, it designates an unidentified central financial work leading body to oversee decision-making, top-level design, and the implementation supervision of financial stability and development policies.
The FSDC was dissolved in March 2023, with its responsibilities transferred to the newly formed Central Financial Commission (CFC) as part of a broader government and party institutional reorganization.
China’s financial system is facing significant challenges, including a sluggish economic recovery, a stagnant property market, and increasing financial stress on heavily indebted local governments.
The initial review of the bill took place in December 2022, which included the establishment of a financial stability fund to address major systemic risks.
The latest revisions align with the directives from the Central Financial Work Conference in October, emphasizing a comprehensive strengthening of financial supervision and the resolution of financial risks, according to the NPC post.
Paraphrasing text from "Reuters" all rights reserved by the original author.
