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Learn from China, RP regulators told

China is now realizing the dangers posed by its financial system, a development that local banking regulators must monitor and act accordingly so dangers can be avoided.
In the article “How China is getting serious about financial risk,” published at Bloomberge Politics, observers in the Philippines must realize that even the world’s largest economy is now acting on how to evade massive financial collapse brought by to much liquidity in the home of 1.6 billion people.
It is said that China’s strategy is to slowdown debt growth than cutting the overall stock both in financial system and bourse market.
The country’s move to avert possible major financial crisis actually started in 2016 but it’s now in the fast mode, according to the article.
No less than President Xi Jinping led his country to take drastic measures to avoid major financial collapse when he announced the safeguarding of national financial market security in April 2017.
At the center of Xi’s marching order is curbing of state-owned enterprise borrowing. The leader called for a stop of such borrowing as “priority of priorities.” He also warned that officials not following the order will be held accountable “for lifetime”.   
Quoting top bank regulator Guo Shuquing, the central bank of China is now also moving fast to dismantle shadow banking sector and suppress household leverage. 
Shadow banking happens when entities operate in the guise of banks but are actually lending investors that charge very high interest. Shadow banking is prevalent in the Philippines.
Critics in the Philippines said if China can control the proliferation of shadow banking, the more the Philippines can because the amount of liquidity at home is very small compared to China.
The world’s biggest economy’s stock market is now worth $12 trillion while its dollar reserves is over $1.7 trillion.
“China can cause the next global crisis because of the huge shadow banking industry,” the source in the stock market industry told the Daily Tribune.
Observers praised the Chinese government because of its tough actions to stop illegal lending. However, they are adamant if Philippine regulators can do the same knowing that its banking sector is too small compared to China’s.
“This is what regulators should be doing. Take it by the horn before it explodes,” the source added.
China’s central bank governor Zhou Xiaochuan said the risks of very high liquidity is hidden, complex, sudden, contagious and hazardous. 
As of end-2016, total borrowings in China had ballooned to about 260 percent of its economy’s size, up from 162 percent eight years ago.  Ed Velasco 

1 comment

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