China's new central banker pledges to rein in financial risk

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BEIJING – China’s new central bank governor outlined sweeping plans Sunday to rein in rising debt and financial risk, but expressed confidence that Beijing can prevent potential dangers.

High debt levels for Chinese state-owned companies, local governments and households are “still an effort,” Yi Gang said within an economic conference. The design and style marked his first extended public appearance following brief remarks to reporters after his appointment last Monday.

The ruling Communist Party has declared controlling financial risks a top priority following a run-up with debt that prompted global rating agencies in 2009 to slice Beijing’s credit ratings.

Regulators will “deepen regulatory system reform and enhance its resilience against systemic risk,” Yi said. He was quoted saying designed to include steps to “impose more financial discipline” on government-owned companies, develop a better financing system for local governments and “create something to circumvent risk in the properties sector.”

“We will need to lose virtually no time in adopting guidelines on financial regulation” for specialized entities which include asset management and holding firms that have evolved rapidly, said Yi.

Still, he stated, with Beijing’s experience and resources, “China is a fantastic position to mitigate preventing risks.”

Yi, who earned a Ph.D. in economics from the University of Illinois, succeeded Zhou Xiaochuan, who became China’s most prominent figure in global finance on a record 15-year term as central bank governor. Yi may be a two-decade veteran of your bank and it is well-known to foreign investors and regulators as director of China’s foreign currency regulator.

Zhou warned in October that rising debt have a “severe impact” within the world’s second-largest economy, but told reporters this month over the annual meeting of China’s ceremonial legislature that regulators believed they’d debt in hand.

Total debt in China swelled to above the same as 270 percent of annual economic output, nearly the condition of the western world, as Beijing trusted infusions of credit to prop up growth adopting the 2008 crisis. Financial analysts worry that heavy borrowing by local governments while stating companies could threaten the steadiness from the economic system. Previously low debt owed by Chinese households boasts begin to rise.

Beijing has begun endeavoring to do away with debt, including by letting some state companies to grant banks stock. But private sector analysts say regulators are moving too slowly.

In February, regulators seized power over certainly one of China’s biggest insurers, Anbang Insurance Group, after its debt load pursuing the multibillion-dollar global spree of asset purchases raised doubts about the privately operated company’s financial stability.

Authorities said Anbang’s founder is prosecuted but have not yet release details.

Other major companies including Wanda Group, which owns Hollywood studio Legendary Entertainment, and HNA Group face questions when they can repay huge amounts of dollars borrowed to invest in foreign expansion.

“Currently potential risks in China continue to be reflected in several sectors,” said Yi. He cited “persistently high” debt at state companies and said the “surging leverage ratio” among households is usually a “cause for concern.”

Yi also promised more action to develop international utilization of China’s tightly controlled currency, the yuan, though he gave no timeline. He repeated official means to open the state-dominated financial state and invite foreign ownership of banks, but gave no new details.

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