MNI POLICY: China's Financial Sector Needs Supply-side Reform

     BEIJING (MNI) - Pan Gongsheng, vice governor of the People's Bank of China

called for supply-side structural reform in China's financial sector in an

interview with China Central Television, the state TV broadcaster. 

     Here are the key points from the interview:

     --There are structural flaws in China's financial services sector, which is

dominated by indirect financing led by large and medium-sized banks, with poorly

developed equity financing, said Pan. This requires supply-side structural

reforms across the industry, he added.

     --The PBOC must promote capital market reform, broaden equity financing

channels, develop small and medium-sized financial institutions focused on

serving SMEs, whilst sticking to prudential monetary in order to create a

suitable monetary and financial environment for reforms, Pan said.

     --Pan also noted that China's financial risks have eased somewhat, but to

further prevent systemic financial risks, the PBOC must continue with its

deleveraging campaign, strengthen regulation of banks' non-performing assets,

deal with bond default risks and curb the growth of local governments' implicit

debts.

     --The PBOC will also further the opening of the financial services sector,

liberalize the yuan exchange rate formation mechanism, whilst making the

currency flexible and stable at a reasonable level, Pan said.

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

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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