China to set up new financial watchdog as part of reforms

theguardian.com:

China will set up a new financial watchdog to replace its banking and insurance regulators as part of an overhaul of state institutions after concern about exposure to its creaking property market.

The new body, which does not have an official name yet, would bring oversight of China’s financial system under direct control of the State Council, the top government body. There are also reports that the president, Xi Jinping, who will in all likelihood be granted a third presidential term on Friday, will revive the Central Financial Work Commission, an organisation that would supervise the financial system on behalf of the Chinese Communist party, although this has yet to be announced publicly.

The new financial watchdog, which will be voted on at this week’s annual parliamentary session, the National People’s Congress, will centralise control of China’s $60tn (£50.6tn) financial sector. It is part of a series of reforms that will “strengthen the centralised and unified leadership” of the party, according to the proposal.

In the speech from the outgoing premier on Sunday, Li Keqiang promised that Beijing would focus on stability and mitigating economic risk this year, particularly in the property sector. Last year China’s property sector shrank by 5% after government crackdowns on speculation and lending led to a cashflow crunch that caused developers to stall construction on millions of housing units. The zero-Covid policy, which was abandoned in December, also caused economic chaos as factories and construction sites were closed and workers were unable to leave their homes.

In February, Xi warned of three “systemic risks” to China’s economy: the embattled real estate sector, financial regulation and local government debt. The