China will press ahead with its opening-up commitments and relax
restrictions on foreign investors in the financial services sector,
the People's Bank of China said yesterday.
It "will, in a modest manner, allow foreign investors to take
more stakes in the financial services sector and relax the
restrictions on their business scope and origin," the central bank
said in its second China Financial Stability Report.
The report comes only a month before the country fully opens up
its banking sector to foreign competition in line with its World
Trade Organization (WTO) commitments.
It would also "determinedly push forward the reform of
state-owned commercial banks to improve their ownership structure,
corporate governance and internal control mechanisms, provided that
the State remains (their) absolute majority shareholder," the
central bank said.
It also vowed yesterday to beef up its control on major
financial institutions to safeguard national financial
security.
According to the report, China has made breakthroughs in
financial reform and dealt well with financial risks, with the
overall financial system showing signs of stability last year.
"The rapid yet stable national economy has laid a sound
foundation for achieving financial stability," the central bank
said.
But it warned that international imbalances and swings in oil
and other resource prices could have an impact on the country's
financial stability.
Further, intensifying competition and the potential risks that
could arise from financial innovation might also pose risks to
China's financial stability.
Direct financing is still developing at a sluggish pace in the
country as enterprises tend to rely heavily on bank loans. This "is
concentrating on banks some of the risks that should have been
shouldered by financial markets," the central bank said.
This financial structure is detrimental to the operations of
banks and to the prevention of systematic financial risks, it
said.
The central bank added that it would be accelerating the
establishment of a deposit insurance mechanism.
(China Daily October 31, 2006)