PBoC Governor sets timelines for financial reforms

BEIJING - Yi Gang, the new Governor of People’s Bank of China, has sent a clear signal at the Bo’ao Forum that China is serious about its commitment to opening up the economy and carrying out reforms in financial markets. Yi reassured the markets about China’s determination, not only to reform the domestic monetary policy framework but to open up the financial sector further.

He also made it clear that China will not devalue its currency as a response to any trade war.

The Bo’ao Forum marked Yi’s first international debut in his new role as PBoC governor.

In a note on Yi’s comments, ANZ Bank says markets have paid particular attention to the opening up measures in China’s financial market, which were detailed by Yi.

By June 30, 2018, most of the measures would be in place, Yi said. This is the first time that China has provided a clear timeline on its financial market opening-up plans since the 19th Party Congress last October.

According to Yi, China will do the following:

?Encourage foreign investment in the financial sector, including increasing to 51% the threshold of foreign ownership in insurance companies, security houses, asset management and futures companies; removing foreign investment threshold in banks and asset management companies, and providing national treatment to foreign financial institutions.

?Quadruple the daily trading quota on the Shanghai/Shenzhen-HK Stock Connect scheme, taking the annual quota from 13bn to 52bn from May 1 onwards.

?Aim to start the Shanghai-London Stock Connect by 2018.

Yi also spoke of China’s monetary policy outlook and reform directions in the future.

He said China’s monetary policy will maintain a tightening bias on the back of global major central banks’ policy

normalisation (he is comfortable with the current China-US interest rate differential) and concerns over high leverage.

He also highlighted interest rate liberalisation and FX rate reforms, which will continue and be more market-driven in the future.

ANZ Bank says it views the latest details about the opening up financial market as positive (although some of the commitments were made last year following US president Trump’s visit to China), especially because Yi has given a clear timeline for reform implementation

“This may also help boost China’s further integration into global financial markets, including the possibility of Chinese bonds being included in global bond indices,” ANZ says.  www.live.anz.com (ATI).