Chinese Financial watchdogs have called for tougher international oversight to stop big flows of hot money across borders in the aftermath of the Coronavirus Pandemic.

Addressing the International Finance Forum in Beijing over the weekend, regulators also vowed to have zero tolerance for market manipulators.

Liang Tao, the Vice Chairman of the China Banking and Insurance Regulatory Commission, said that with the recovery of developed economies, market volatility and vulnerabilities had increased as expectations shifted towards tighter monetary policy.

But the recovery remained unstable and unbalanced, as coronavirus cases mounted in some countries, Liang said.

“While advanced economies are insisting on low-interest-rate policies, some emerging economies have recently announced interest rate hikes,” Liang said.

“This may cause a repricing of global financial assets and even cause asset bubbles to burst.”

As a result, there needed to be tougher cross-border monitoring of capital flows to prevent financial crises, he said.

Liang also said developing countries should have a bigger voice in the global economic governance system, ensuring it was more inclusive as it adapted to changes in the economic structure around the world.

Li Chao, the Vice Chairman of the China Securities Regulatory Commission, told the forum there would be “zero tolerance” of any illegal activities involving securities, and China would continue to crack down on fraudulent issuance, financial fraud, and market manipulation to let “bad performers pay a heavy price”.

Former central bank governor Zhou Xiaochuan said multilateral free-trade agreements such as the Regional Comprehensive Economic Partnership (RCEP) could help promote global trade and economic growth.

Zhou said the RCEP could reshape trade rules while further regional economic integration could smooth out global industrial and supply chains.

“We hope to see the RCEP signatories speed up the completion of the domestic review process, and the free-trade agreement negotiations between China, Japan, and South Korea to move forward,” Zhou said.

“We will strengthen the overall coordination of the RCEP and CPTPP agreements, promoting a more open level of markets and broader coverage in the free-trade agreement in the Asia-Pacific,” he said, referring to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

With around 30 percent of the world’s GDP and population, China is the biggest member of the RCEP, a deal signed last year by 15 member states, excluding the United States.

It is the first time China, South Korea, and Japan have been part of the same free-trade pact, potentially making it easier for China to skirt US sanctions and buy hi-tech goods with embedded research and development from its two neighbors.

At the same time, it was necessary to strengthen China’s Belt & Road Initiative, the Master Plan on Asean Connectivity 2025, and the Eurasian Economic Union for infrastructure construction and increase the economic growth potential, he said.

Zhou also said China would supply more than US$1.3 billion in debt relief as part of a G20 initiative to ease the burden from the pandemic on the world’s poorest countries.

Jin Liqun, president of the Asian Infrastructure Investment Bank, said nearly half of all low-income countries were deeply in debt, compounding their problems in recovering from the pandemic.

Jin said the AIIB, along with other international banks, maintained that new financing should be provided to debt-trapped countries to support their economic development.
“The international community must join hands once again to make the global governance system a system that is truly capable, authoritative, and one with its own teeth,” he said.

Author: Karen Yeung