China plans to convene a key financial policy gathering that takes place once every five years next week to prevent risks and set medium-term priorities for the US$61 trillion (HK$475.8 trillion) industry, according to people familiar with the matter.
State leaders, regulators and top bankers will gather at the closed-door national financial work conference in Beijing on October 30 to 31, they said, adding that officials led by President Xi Jinping are poised to focus on resolving financial risks, including the property crisis and the spiraling debt at local government financing vehicles.
The meeting will provide more clarity on how authorities intend to turn around the world’s second-largest economy without stoking unintended risks.
Maintaining financial stability is paramount at a time when China is grappling with the fallout from a protracted property market slowdown and a worsening crunch in the US$9 trillion local government debt market.
China watchers have paid special attention to the conference in the past because of the impact and influence it has on the country’s banking system and broader economy. First introduced in 1997 in the wake of the Asian financial crisis, the conference’s overarching goal is to push for reforms to aid economic growth and safeguard stability.
Investors are also counting on upcoming events – including the politburo meeting and Third Plenum of the Communist Party, and a potential meeting between Xi and US President Joe Biden at the Apec Summit next month – for policy catalysts.
Over the past year, Beijing has enlisted the nation’s largest state banks to shore up the economy with cheap loans and mortgage rate cuts, though the recovery remains fragile due to weak domestic demand.
They have also ordered the lenders to help ease credit crunches in the property and local government financing vehicle debt market, a move that some analysts warned could be a drag on the systematically important lenders.
Local governments were bogged down as slumping land sales and massive Covid-induced expenditures have weakened their ability to keep their financing vehicles afloat. Local authorities are finding it more expensive to sell bonds this year, the latest sign of rising stress in the market.
Investor pessimism is mounting. The benchmark CSI 300 Index slid more than 4 percent last week, its worst in a year, erasing all the gains seen during its epic reopening rally that took off late last year. The selloff came despite market-boosting policies, including a liquidity injection by the central bank and tightening of curbs on short-selling activities by the securities regulator.
China last held the conference in 2017. Since then, policymakers have relentlessly cracked down on excessive leverage and risk-taking in the broader financial sector, crippling growth at finance giants such as Ant and pushing developers such as China Evergrande Group to its knees.
The conference has grown in importance in recent years, with the 2017 conference presided over by Xi himself, while the preceding ones were overseen by premiers.
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