The appointment of Guo Shuqing as chairman of the China Banking Regulatory Commission (CBRC) raises expectation of a new approach of the shadow banking sector, says financial expert Sara Hsu in the East Asia Forum.
Guo’s appointment indicates that China’s leadership is acutely aware of the financial risks that are building in the economy because of mounting debt and an increasingly unwieldy shadow banking sector. Real estate property bubbles, overcapacity in some sectors and supply-side reform are just a few of the challenges the government needs to tackle. As Guo stated on 2 March, ‘we will put priority on financial risk control to make sure there won’t be any systemic financial risks’. Guo also noted that the banking sector controls business risks and it should ‘strengthen the sense of responsibility’ toward these risks.
What is not yet clear is how Guo will balance the need for growth with financial risks. But it is comforting to know that he has ample experience in implementing market-oriented financial reforms that dampen risk while creating room for economic activity. Still, the challenges are immense and only time will tell how Guo will balance these contradictions.
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