I see this as a very wise and positive restructuring:
Ron
Friday October 30, 3:50 pm Eastern Time
China unveils sweeping reforms to central bank
BEIJING, Oct 30 (Reuters) - China on Friday unveiled a sweeping reform package for its central bank in a bid to reduce risk and avoid the Asian financial contagion.
In the first official confirmation of the new structure for the central bank, People's Bank of China deputy governor Liu Mingkang said the bank would set up nine regional branches to replace existing provincial branches.
The leaner structure would remove central bank branches from the sway of local officials, Liu wrote in an essay published in the China Economic Times.
''The scale of the central bank's current branch network is sprawling, their management hierarchy is complicated and the system is susceptible to local administrative intervention,'' he said.
China would also tighten supervision on foreign debt levels and the inflow of short-term capital in the wake of the Asian turmoil and the recent collapse of Guangdong International Trust and Investment Co (GITIC).
The central bank earlier this month shut trust firm GITIC, a major borrower on international markets, for inability to pay maturing debt.
The revamp of the branch network was crucial to the health of China's financial system, Liu said.
Analysts have said Beijing aims to set up a central bank along the lines of the U.S. Federal Reserve, giving the People's Bank more clout in the supervision of China's unruly financial sector.
Bankers have said the new branches would be located in the cities of Shenyang, Tianjin, Jinan, Nanjing, Shanghai, Guangzhou, Wuhan, Chengdu and Xian.
Liu said the central bank would be the sole regulatory authority over commercial banks, surrendering its former responsibility for the insurance sector and the securities markets.
He urged China to take lessons from crisis-hit Asian countries, which he said were sunk by loose control of foreign debt.
''We should control the volume, structure and growth of foreign debt,'' he said.
''We should pay attention to improving the composition of foreign debt, paying particular heed to controlling the inflow of
short-term capital.''
Since the closure of GITIC, China's level of foreign debt has come under close scrutiny and Chinese officials have taken pains
to underscore the government's ability to meet its foreign debt obligations.
China's State Administration of Foreign Exchange on Thursday said outstanding foreign debt was $137.96 billion as of June 30, up $7.0 billion since the end of last year.
Liu said China must set up a mechanism to allow bankrupt financial institutions to go out of business and reject a system in which rescue measures would breed moral hazard. |
