Why China Is Tightening Its Oversight of Banking and Tech

Alicia García-Herrero, the chief economist for Asia and the Pacific at Natixis, a French investment bank, said that the centralization suggested preparations to reorder the banking sector. “That level of concentration of power to me is only explained by — and this is the key — a massive restructuring coming,” she said.

The new agency will also take responsibility from the central bank — the People’s Bank of China — for the protection of consumers and investors. The central bank will also reopen offices around the country that it had closed in a previous reorganization, providing further scrutiny of local financial institutions.

The difficulty with replacing local officials with national officials is that local officials may have a better understanding of financial conditions in their towns and be able to stop fraudulent investment schemes, said Victor Shih, a political scientist at the University of California, San Diego. But officials with local ties may also be more easily influenced by bank managers to ignore misconduct.

The National Development and Reform Commission, China’s powerful central planning agency, will separately relinquish its oversight of the sale of corporate bonds, which are a form of borrowing. That duty will now fall to the China Securities Regulatory Commission, which already oversees the bond trading.

Article source: https://www.nytimes.com/2023/03/09/business/china-peoples-congress-financial-regulation.html