China wants to set up a new financial supervisory authority as part of a comprehensive reform

• New body consolidates regulation under Cabinet control
• Current banking and insurance supervision are to be reduced as planned
• New data office established, Science-Tech Ministry to be remodeled
• Parliament wants to confirm the largest government reshuffle in ten years

BEIJING, March 7 (Reuters) – China will form a new national financial regulator that will consolidate oversight and replace its banking and insurance watchdog as part of a broader government overhaul announced on Tuesday that includes plans for a national data bureau.

The financial regulation proposal, tabled in China’s parliament during its annual session, would shift oversight of the industry, excluding the securities sector, to a body reporting directly to the State Council or Cabinet to strengthen institutional oversight.

Last week President Xi Jinping, who served a landmark third term at the helm in October, renewed his call for ambitious reforms of the Communist Party and state institutions.

The National People’s Congress (NPC), which ends Monday, will also confirm a slew of new leaders, including Li Qiang, who is set to be the next prime minister in what is expected to be the biggest government reshuffle in a decade.

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Under the new plan, the China Banking and Insurance Regulatory Commission (CBIRC) will be abolished, with its responsibilities transferred to the new government along with certain central bank and securities regulator functions.

As part of the broader government restructuring, the number of staff in the central state institutions will be reduced by 5%.

“The overhaul of the financial regulatory framework reflects the new focus on ‘dual circulation’ – both domestic and global circulation of the economy – and ‘single national markets,'” said Winston Ma, associate professor in the law school at New York University.

“In the future, different financing markets – equity, debt and insurance – will be regulated in a more holistic way, while at the same time financial market regulation and industry policies will be more integrated than before,” he said.

China’s financial sector is currently overseen by the People’s Bank of China (PBOC), the CBIRC and the China Securities Regulatory Commission (CSRC), with the Cabinet’s Financial Stability and Development Committee having overall responsibility.

“One could certainly argue for better coordination between regulators, but a whole new super-regulator might not be the answer,” said Fraser Howie, author of several books on China’s financial system.

“But the centralization of power appeals to many in China.”

Lawmakers will vote on the institutional reform plan on Friday.

“STRENGTHEN SUPERVISION”

According to the plan, the new government will “strengthen institutional oversight, behavioral oversight and functional oversight.” Surveillance will be “pervasive” and “continuous,” the proposed plan said.

Under the existing structure, the CBIRC combined the corresponding functions of the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corp (FDIC) in the United States, with some regulatory role played by the central bank, Li Nan said, Professor of Finance at Shanghai Jiaotong University.

“Now all of these regulatory functions are with the new office, which is basically CBIRC, with some regulatory responsibilities being taken back from the PBOC and CSRC, which makes perfect sense,” she said.

“And the PBOC will be more focused on monetary policy after that, which is similar to what the Fed is doing,” she said.

Under the plan, the PBOC’s nine regional branches will be abolished and replaced with 36 branches across the country, reversing a reform implemented in 1998 that mirrored the US Federal Reserve’s system.

Separately, sources said China may revive the Central Financial Work Commission (CFWC), a top-level financial sector oversight body directly under the leadership of the Communist Party, a decision on which could be announced after the parliamentary session.

DATA CONTROL

As part of the reforms, the government will also set up an office responsible for coordinating the sharing and development of data resources, according to a plan submitted to Parliament.

The proposed office will be headed by the powerful state planner, the National Development and Reform Commission (NDRC), and will take over some of the functions of the office of the Central Commission on Cyberspace Affairs, which oversees China’s Internet.

The tasks of the new office include the cross-industry exchange of information resources and the promotion of smart cities.

China has increased oversight over data in recent years, fearing that unaudited collection by private companies could allow rival state actors to weaponize information about infrastructure and other national interests, and believing that data could have become a strategic economic resource.

Beijing will also reorganize its science and technology ministry to focus resources on achieving breakthroughs amid US efforts to block Chinese access to key technologies. It will also set up a Central Commission on Science and Technology to strengthen the Communist Party’s control in this area.

Reporting by Ryan Woo, Ziyi Tang, Xie Yu, Kane Wu, Julie Zhu, Eduardo Baptista, Brenda Goh, and Laurie Chen; writing by Tony Munroe; Edited by Robert Birsel

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