THE PEOPLES’ BANK OF CHINA has set out its ten priorities for the year. The three it has added to last year’s list of seven are what caught this Bystander’s eye as they indicate what is at the forefront of official thinking: developing green finance, playing a greater role in global financial regulation and containing risks in the bond market.
The priorities are set out in a statement following the central bank’s recent work conference, part of the cascade of work conferences across officialdom from the Politburo’s meeting in December on the 2021 economic goals and subsequent Central Economic Work Conference the same month.
Some high-profile defaults have made bond-market reform as high a priority for the central bank as reining in fintech companies. We expect to see regulatory reform to strengthen market governance, especially in the area of default resolution, and exemplary supervisory punishment of misconduct such as fraudulent issuance. The two bond markets are likely to be unified, with the introduction of common standards used as an opportunity to tighten regulation overall.
The central bank is signalling that it will closely monitor the carbon trading market that is due to start on February 1. It also seems set to get more deeply involved with central banks’ international effort to improve financial systems’ ability to manage climate-change risk and require more transparency from financial institutions about climate-related impacts of their lending and investment.
On the domestic front, the bank will steer the financial system to provide more finance for green development as a prop for an important pillar of national policy. This will be mirrored for other national priorities, including the tech and agricultural sectors and small businesses, which are being weaned off the shadow banking system.
There is also a nod in the direction of not stifling financial innovation but a more vigorous waving of the finger in the direction of fintech companies, which can expect continuing tighter oversight both of the financial risks they may pose and their alleged abuses of market power.