China has set new rules to curb risks at its policy banks, stepping up oversight of the country’s financial system as Beijing looks to avert a feared debt crisis in the world’s No. 2 economy.
For the first time, the China Banking Regulatory Commission (CBRC) will impose specific rules designed in part to reduce financial risk at three banks tasked with funding Beijing’s pet projects and supporting Chinese companies abroad.
The rules, which were released on Wednesday, include setting up mechanisms to make sure they do not lend more cash than they can afford as well as corporate governance provisions.
The new rules come as Beijing copes with ballooning debt that some analysts say threatens the stability of the Chinese economy.
The three banks — China Development Bank (國家開發銀行), Export-Import Bank of China (中國進出口銀行) and the Agricultural Development Bank of China (中國農業發展銀行) — had 25 trillion yuan (US$3.8 trillion) in assets at the end of September, according Xinhua news agency.
That makes them roughly as large as the country’s biggest state-owned bank, the Industrial and Commercial Bank of China (中國工商銀行).
The special regulations will “strengthen risk control” and ensure the policy banks’ “safe and stable” operations, an unnamed CBRC spokesman said, noting that the lenders had consulted commercial banking regulations since their establishment in 1994.
The nation’s leadership is struggling with a vast debt mountain that has seen Moody’s and Standard & Poor’s downgrade their sovereign ratings for the country
Debt-fueled investment has underpinned the economy’s rapid growth, but there are widespread concerns that years of freewheeling credit could lead to a financial crisis with global implications.
In other news, China’s non-financial outbound investment slumped to US$86.3 billion in January to last month, plunging 41 percent from a year earlier, as projects in some industries dried up.
There were no new real estate, sports or entertainment deals for the period, the Chinese Ministry of Commerce said in a statement yesterday.
Most outbound investment was in leasing and business services, manufacturing, wholesale and retail sales and information technology services.
“Irrational” outbound investment has been curbed further, the ministry said, repeating the language it has used this year as authorities push to halt capital outflows.
That is reversing an unbroken streak of acceleration since 2010.
Outbound investment soared 44.1 percent last year to US$170.1 billion, about four times the 2009 level, ministry data show.
Additional reporting by Bloomberg
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