China’s financial regulator said it would implement a series of measures to shore up the nation’s troubled smaller banks and insurers, while continuing a clampdown on shadow financing and property speculation.
The regulator would introduce measures to eliminate bad loans and promote mergers, capital injections and the restructuring of high-risk institutions, the China Banking and Insurance Regulatory Commission (CBIRC) said in a statement on Friday.
Other steps include setting up a resolution fund and bridge banks, while introducing new investors and allowing market-oriented exits, it said.
Many of China’s 3,000 small banks are coping with a mountain of bad loans, prompting the government to crack down on risky funding practices. Small, troubled banks pose a risk to the Chinese economy, which is already growing at its weakest pace since the early 1990s.
The watchdog would gradually lower the risks of shadow financing by reducing noncompliant investments in nonstandard assets, while insurance institutions would clean up multilayered investment and leveraged transactions between related parties, the CBIRC said.
The CBIRC would also increase risk management in areas such as real estate, make sure that housing deals are not for speculation and prevent capital from flowing illegally into property markets.
Moreover, it would continue to resolve the hidden debt risk of local government bonds.
Meanwhile, China’s central bank pledged more financial support for small and micro businesses while saying that it plans to stick to a prudent monetary policy stance this year.
The People’s Bank of China would improve the incentive mechanism for lending to such companies, it said in a statement following a two-day work conference in Beijing.
Authorities would make it easier for them to gain access to financing through targeted reserve cuts, relending and rediscounting, among other policy tools, it said.
Separately, the Chinese State Administration of Foreign Exchange said it would diversify policy tools to counter the impact from external shocks on the country’s trade and investment, international balance of payment and cross-border capital flows.
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