Chinese financial regulators at both the central and regional government levels convened a video conference last Friday to discuss the resolution of financial risks. This was confirmed in a readout released by the People’s Bank of China on Sunday. The meeting highlighted the need to coordinate financial support in order to address local debt risks and make necessary policy adjustments for real estate loans.
According to analysts at Rhodium Group, the weak financial situation of local governments has hindered the central government’s ability to support the economy through fiscal policy. Additionally, the slump in the property market has resulted in declining land sales, adversely affecting local government revenues.
Investors are becoming increasingly concerned that certain governments may be incapable of rescuing their debt-raising entities. This heightened sensitivity is due to China’s cautious approach to stimulus despite an overall economic slowdown and consistently disappointing data over the past few months. Authorities have prioritized the prevention of financial risks and have acknowledged the financial strain faced by local governments as a result of the property downturn and COVID restrictions last year.
The recent meeting signifies a gathering of a new group of financial policymakers as part of China’s regulatory system overhaul this year. Prominent attendees included the new head and party secretary of the central bank, Pan Gongsheng, as well as deputy leaders of the National Administration of Financial Regulation and China Securities Regulatory Commission. Representatives from major state-owned banks, the Shanghai and Shenzhen stock exchanges, and the administrative office of the Central Financial Commission were also present.
In conclusion, this high-level conference demonstrates China’s commitment to addressing financial risks and ensuring stability in the face of economic challenges.
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