A poster reading “China’s Financial Street, the World’s Financial Street” in Beijing on November 21, 2022 Photo: VCG
Amid growing global financial turmoil, tackling financial security risks became a hot topic at the 2022 Financial Street Forum, a high-level event often described as the bellwether of China’s financial reform.
Speakers at the event, which took place on Monday with a theme focusing on financial development and security under global geo-economic changes, included former head of the China Securities Regulatory Commission Xiao Gang and the deputy head of the Export-Import Bank of China Li Jun.
Xiao said that China should improve financial security governance from several aspects, including speeding up launching the financial security law, as well as building a financial safety net by methods such as enriching policy toolboxes and improving risk monitoring, assessment, early warning and correction mechanisms, the cs.com.cn reported.
Li warned that instability is obviously rising in global markets, and the chances of “black swan” or “gray rhino” events are significantly increasing.
Awareness of potential risks in the global financial sector has increased lately in China, as world financial markets are becoming more volatile in response to the US’ and other major economies’ central bank policies and turbulent global geopolitics.
Chen Jia, an independent international strategy analyst, said that Western countries’ sanctions on the Russian economy and financial sector amid the Russia-Ukraine conflict have caused the most harm to global financial security this year.
According to Chen, the US government has taken advantage of the US dollar system’s hegemony in the global economy and trade to place restrictions on Russia’s financial transactions, which poses a serious threat to Russia’s sovereign financial security.
“Global fintech, data safety and financial market stability mechanisms all underwent sharp changes amid the Ukraine crisis, and no incident can be compared to it recently in terms of the intensity of the impact on global financial security,” Chen told the Global Times.
Yang Haiping, general manager of the research and development department at the Bank of Inner Mongolia, told the Global Times that geopolitical tensions and changes in global liquidity are the biggest threats to global financial security at present, and a financial crisis will be hard to avoid if the international community can’t strike deals on greater financial collaboration.
Li noted during his speech that maintaining international financial security faces challenges nowadays, as many central banks are increasing interest rates, disrupting market pricing mechanisms and worsened asset-price fluctuations.
The US Federal Reserve is still in the middle of a hawkish interest rate hike cycle this year, trying to tamp down soaring inflation, with the pace of the hikes being the fastest in decades. The move has weakened many other currencies, including the euro, the Japanese yen and the Chinese yuan, while also causing huge volatility in global stock markets.
In 2022 so far, the US’ Dow Jones has plunged by about 8 percent, while the Nasdaq is down by nearly 30 percent.
Experts stressed that China is so far “within the safe boundaries” in terms of financial operations, though it is also facing dual pressures from the internal and external markets that pose some financial risks.
From Yang’s point of view, China still faces spillover financial risks in certain areas against the backdrop of high leverage, such as real estate, while overseas risks mainly come from “financial attacks” by certain forces and spillovers from global markets.
“China should keep the focus of financial security work within China, but still pay special attention to external shockwaves,” Yang told the Global Times.
Li said that China should enhance its awareness of and ability to prevent and eliminate hidden dangers to keep risks under control, by keeping a certain level of risk appetite and carrying out stress tests.
Also, China should deepen communication and cooperation in the financial sector through such methods as establishing a regular coordination platform network to help financial institutions cooperate.