MNI: Key Economic Implications in China's Proposed Govt Reform

     BEIJING (MNI) - China is simplifying government functions and centralizing

power. According to a draft plan submitted to the National People's Congress,

which will almost certainly approve it this week.

     - Combine China Banking Regulatory Commission and China Insurance

Regulatory Commission to form the China Banking and Insurance Regulatory

Commission. 

***Comment: The move seeks closer coordination between financial regulators and

efficiency to better serve President Xi Jinping's priority of preventing

financial risks. After the financial sector's years of rapid expansion,

loopholes and ambiguities of regulators' duties are becoming more apparent. 

     - The People's Bank of China, the central bank, will assume the authority

to draft rules and regulations related to insurance and banking and set up a

system of prudence and supervision.

***Comment: The long-anticipated change confirmed PBOC's central role in the new

financial regulation system, together with the powerful Financial Stability and

Development Commission. The streamlined regulatory system will allow monetary

policy to better coordinate with deleveraging and risk prevention.

     - China will merge taxation authorities separately held by various

government hierarchies, and place them under the coordinated management of the

State Administration of Taxation.

***Comment: China will reduce fiscal stimulus this year. The merge of tax

institutions strengthens the central leadership and weakens the fiscal power of

the local governments, effectively pushes ahead the deleveraging campaign and

discourages borrowing by local government. In addition, the move can reduce

fabrication of data and improve quality of economic information. 

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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