China will create a new national financial regulatory body to replace its banking and insurance supervisory body, as part of a government reform announced on Tuesday that includes plans to create a national data bureau.
The proposed financial regulation, submitted to China’s parliament during its annual meeting, would incorporate oversight of the industry, excluding the securities sector, into an administration directly under the State Council, or cabinet.
The China Banking and Insurance Regulatory Commission (CBIRC) will be abolished and its responsibilities will pass to the new administration, along with some functions of the central bank and securities regulator.
As part of the broader reform of the Government, the staff of central-level State institutions will be reduced by 5 per cent.
“The revised financial regulatory framework reflects the new orientation toward ‘dual circulation’ — the national and global circulation of the economy — and ‘uniform national markets,'” says Winston Ma, an adjunct professor at New York University School of Law.
“Looking ahead, the different financing markets – equity, debt and insurance – will be regulated more holistically, while financial market regulation and sectoral monetary policy-making will be more integrated than before,” he added.
The legislature will vote on the institutional reform plan on Friday.
At present, the Chinese financial sector is supervised by the People’s Bank of China (PBOC), the CBIRC and the China Securities Regulatory Commission (CSRC), while the cabinet’s Financial Stability and Development Committee has general powers.
According to the plan, the new administration will “strengthen institutional oversight, behavioral oversight and oversight of functions.”
According to Li Nan, professor of finance at Shanghai Jiaotong University, under the current structure, the CBIRC combined the equivalent functions of the Office of the Comptroller of the Currency (OCC) and the U.S. Federal Deposit Insurance Corporation (FDIC) with some regulatory functions of the central bank.
“Now all those regulatory functions fall to the new office, which is basically the CBIRC, with some regulatory functions retrieved from the PBOC and the CSRC, which makes a lot of sense,” he said.
“And the PBOC will then focus more on monetary policy, similar to what the Federal Reserve does,” he added.
Last week, President Xi Jinping renewed his call for ambitious reforms of party and state institutions. Xi won an unprecedented third term at the party congress in October, making him China’s most powerful ruler since Mao Zedong.
The Government will also create an office to coordinate the pooling and development of data resources, according to a plan submitted to Parliament.
The proposed office will be headed by the powerful state planner, the National Development and Reform Commission (NDRC), and will absorb some of the functions of the Office of the Central Commission for Cyberspace Affairs, which oversees the internet in China.
The functions of the new office will include the exchange of information resources between industries and the promotion of smart cities.
In recent years, China has tightened data monitoring, motivated by fears that uncontrolled collection by private companies could allow rival state actors to weaponize information on infrastructure and other national interests, and by the belief that data has become a strategic economic resource.
A source at a large Chinese tech company said the initial impression was that the office would be primarily responsible for cultivating the data market and that regulatory functions would remain the purview of bodies such as the Cyberspace Administration of China.