Stark (Naked) Warning for Financial Sector!

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China’s financial markets are a hot topic in the media (and around the water cooler in every office in China), but a lot of information is in the form of gossip and rumor. And, god forbid, from blogs! With that in mind, I will report on Liu Mingkang’s (Chairman of the China Banking Regulatory Commission) remarks at his recent “Icebreaker Lecture” for the 48 Group Club* at the Westminster Hearings in London.

It is worth noting that Liu is very cosmopolitan, personable and confident. Very much in the mould of the modern leadership in China. Not only did he make reference to his time in the countryside during the Cultural Revolution (when he studied BBC English on the Radio), he also spoke frankly about the challenges facing China’s financial sector today. Key points included:

    • Excess liquidity has led to bubbles in the stock and housing markets, while a lack of financial products make the problem worse. As he put it: “I am quite alert [to these things] nowadays”. (An understatement perhaps!).

    • Recent actions to control the economy have included lowering of export tax rebates, encouragement of more imports, increased social spending, development of rural areas, and increased foreign investment.

    • The development of the harmonious society, by sharing the benefits of economic growth with rural areas, was noted to be a top priority for the government.

    • The challenges require innovative solutions and, while “fish always stink from the head” (his words), the establishment of local services, such as township banks to provide small loans, can have an important impact on the ground.

    • Development requirements include better corporate governance (at the top of the list), diversification of ownership, enhanced risk management capabilities, and more transparency.

The system is certainly under stress, but it seems to be in good hands. How will the current boom develop? It is hard to say, but I can’t improve on what Chairman Liu said:

    “Only when the tide goes out can you see who is swimming naked! It is essential to take measures in good time”.

I think we can assume the regulator and his staff are very busy ensuring they do not get caught short.

Previous reference:

* The author is Honorary Secretary and a Committee Member of the Club.

2 Responses to “Stark (Naked) Warning for Financial Sector!”

  1. Finance information » Blog Archive » Stark (Naked) Warning for Financial Sector! Says:

    […] ed to bubbles in the stock and housing markets, while a lack of […] Original post by Jeremy Gordon and powered by Img Fly

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