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November 03, 2018

PBC issued the financial stability report (2018) on China. The report assesses the soundness of financial system in the country since 2017. The report concluded that resilience of financial system was further enhanced and financial operations were generally stable during the observation period. However, in the coming days, risk factors that could affect and undermine the global financial stability are mounting. Domestically, the cyclical, institutional, and structural problems, along with the risks that have built up over years in the economic and financial system, in China have started to show while the structural problems in economic performance remain prominent.

The report reveals that major policies and top-level structure for reform and development have been established. The Financial Stability and Development Committee of the State Council, which was established at the end of 2017, was further enhanced and improved with adjustments to the regulatory structure. Under the new structure, the coordination mechanism for financial regulation was strengthened; the philosophy and framework of macro-prudential management with the central bank at the core were gradually established; and the mechanism for preventing systemic risks was further enhanced. Overall, the economic and financial risks in the country can be broadly contained with little possibility of systemic financial risks. The report further notes that looking into 2019, large uncertainties still exist in the global economy and financial market. In the course of China’s economic transition and structural adjustment from high-speed growth to high-quality growth, there are still possibilities of the emergence of “grey rhino” financial risks. 

Keywords: Asia Pacific, China, Banking, Financial Stability Report, Systemic Risk, PBC

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