OPINIONS Policy fine-tuning stabilizes China's financial markets


Policy fine-tuning stabilizes China's financial markets

Global Times

13:38, May 09, 2019

The Chinese government is taking some moderate and indirect measures to stabilize the financial markets at a time when it is experiencing greater volatility amid rising uncertainty about the China-US trade talks, experts said. 


(File photo: IC)

But they said that such twists and turns in trade talks are normal and won't lead to systemic risks in China.

On Monday, the State Administration of Foreign Exchange (SAFE) said that it would continue to support the opening-up of the financial markets, satisfy the growing needs of offshore investors who want to invest in the domestic financial markets, and attract long-term overseas capital to the nation's financial markets. 

Xi Junyang, a professor at the Shanghai University of Finance and Economics, said that capital outflows usually bring risks, but ushering overseas capital into the Chinese mainland's financial markets would increase liquidity and stabilize the markets. 

Li Chunding, a professor at the College of Economics and Management under the China Agricultural University, also said that as the US has been dissatisfied with China's financial opening-up pace, stressing opening-up would in fact soothe the bilateral conflict. 

In April, the SAFE approved total investment quotas of $4.2 billion for nine Qualified Foreign Institutional Investors (QFII) and investment quotas of 9.7 billion yuan ($1.43 billion) for five Renminbi Qualified Foreign Institutional Investors. So far this year, the SAFE has approved $4.74 billion in investment quotas for 13 QFIIs, exceeding the total investment quota for all of 2018, the SAFE data showed.

Both Xi and Li said that one goal of this policy was to prop up China's stock markets, which had plunged under external pressure. 

Meanwhile, stock investments by China's pension fund have progressed. As of the end of 2018, the fund assets managed by the National Council for Social Security Fund had reached nearly 3 trillion yuan, domestic media reported. 

The domestic financial markets have been volatile in recent days. On Monday, the Shanghai market tumbled by 5.58 percent, the largest decline in about three years. The Shenzhen market plunged by 7.56 percent on that day. 

But Xi said it's unlikely that the trade situation would cause any large-scale systemic risks in China, so the government was unlikely to make any dramatic financial policy changes. 

"China's financial sector is in general very safe, as the government has been doing a lot of work to avoid financial risks. The efforts include strengthening prudential management in the banking sector and standardizing new financial patterns. I believe the government will maintain this management direction and strength for the financial sector, although some policy fine-tuning is still possible," Xi said. 

Xi added that the government is unlikely to roll out strong stimulus measures to prop up the stock markets, as it understands that stock exchanges have their own operational rules. 

Li said that twists and turns in the China-US trade talks are "normal bargaining" as the talks approach the end. "I don't think that the two countries would be at battle-pitch, not to mention the possibility of Chinese financial markets collapsing under external pressure."

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