China’s Financial Regulatory system is highly complex, which includes multiple agencies such as the People’s Bank of China (PBOC), China Securities Regulatory Commission (CSRC), China Banking and Insurance Regulatory Commission (CBIRC), and State Administration of Foreign Exchange (SAFE).
Each agency has a different impact on China’s financial system, which includes banking, securities, and foreign exchange. Therefore, in the past few years, many experts have called to streamline China’s Financial regulatory system to improve coordination among all such agencies.
In 2018, China announced a major restriction of a major financial regulator. It will merge the China Banking Regulatory Commission and China Insurance Regulatory Commission to form CBIRC.
This announcement was mainly made to consolidate the regulatory system and improve its financial system. It’s expected to help reduce systematic risks and enhance transparency in China’s financial sector.
However, on March 7th, 2023, China announced that a new financial regulator of the China Banking and Insurance regulatory commission would be abolished.
- The Parliament is set to confirm the most extensive government reshuffle in a decade.
- The new data bureau has been formed, sci-tech ministry needs to be revamped.
- Current banking and the insurance regulator to be cut under the plan
Government Action for financial regulations
The government will set up a bureau responsible for coordinating and sharing the development of data resources. It will be as per a plan submitted to Parliament on Tuesday.
This new financial regulator will completely replace the current banking and Insurance regulatory commission. It also brings the supervision of the country’s security sector into a body directly under the State Council.
This China’s financial sector is overseen by the People’s Bank of China, CBIRC, CSRC, and the Financial Stability and Development Committee, having overall responsibility.
Under this new plan, the CBIRC’s responsibility will be shifted to new administrations along with the functions of the central bank PBOC and securities regulator CSRC.
Citigroup also said in a research note regulatory loopholes that multiple groups can be bridged by establishing a new body. In addition, the overlap of financial regulation at a local level should be reduced as well.
This new administration aims to strengthen institutional supervision and supervision of behavior and functions. The proposed plan also said that the supervision plan would be penetrating and continuous.
Under the previous setup, the CBIRC combined the equivalent functions of the Comptroller of the currency and Federal Deposit Insurance Company in the US.
Now all those functions are associated with the new bureau. CBIRC has the regulatory role taken back from PBOC and CSRC, which makes perfect sense for everyone.
Later, PBOC became more focused on monetary policy afterward, resembling what Fed does.
Under that plan, PBOC’s nine branches will be abolished entirely and replaced by 36 branches in the country. Some sources have also said that China may also revive the Central Financial Work Commission, a high-level financial sector oversight that comes directly under Community Party Leadership. This decision can be taken after the parliamentary decision.
The powerful state planner will run this proposed data bureau in the National Development and Reform Commission. And also absorb the function of Central Cyberspace Free Commissions, which oversees China’s Internet.
Here, the new bureau’s function will include exchanging information resources across industries and promoting intelligent cities.
China has strengthened oversight over data in the past few years. It has been a concern that unchecked collection by private firms can allow rival state actors to weaponize their information on infrastructure and other interests.
Moreover, Beijing has also started restructuring its science and technology ministry to achieve consistent breakthroughs amid US efforts to block Chinese access to key technology. Apart from that, it will also form a Central Commission of Science and Technology, which is increasing Communist Party control in the world.
Although, after the Chinese government announced a new financial regulator, they haven’t mentioned the reforms of the crypto industry.
In 2021, the Chinese government added a complete ban on cryptocurrencies. However, they are spending a considerable amount of money developing their cryptocurrency, Digital Yuan.
The recent update regarding the Digital Yuan project was the incorporation of new smart contract functionality and its new use cases includes buying securities and offline payments,
Recently, China has also announced a new state-supported institution, mainly known as the Blockchain Technology Innovation Center, speed up the country’s growth in terms of Blockchain Technology.
What is the role of CBIRC?
The role of CBIRC is to supervise and regulate banks, insurance companies, and other financial institutions in China. The main aim of CBIRC is to ensure the financial system’s stability and soundness, protect consumers’ rights, and enhance security for the country’s development.
What were the prime reasons for creating CBIRC?
The creation of the CBIRC was part of a broader effort by the Chinese government to reform and strengthen its financial regulatory system in the aftermath of the 2008 global financial crisis. The merger of the CBRC and CIRC was seen as a way to better coordinate and streamline regulatory efforts
What are the implications of the creation of CBIRC for foreign companies doing business in China?
The creation of CBIRC is part of a broader trend to increase scrutiny of the financial industry in China. Moreover, it may have a huge implication for the countries doing business in China. Foreign companies must navigate new rules and regulations and may face greater scrutiny from regulators.