China to deepen financial reform, open to more foreign investment

The government will fend off risks for high-quality property firms and reduce the burden of interest payments for local governments, the outgoing premier said in his work report to the opening of the annual meeting of China’s parliament.

“We need to deepen reform of the financial system, improve financial regulation, and see that all those involved assume their full responsibilities to guard against regional and systemic financial risks,” the premier said.

China has stepped up its efforts to cope with financial risks as the economy grew by just 3% last year, one of its worst showings in decades. The economy was squeezed by three years of Covid restrictions, a crisis in its property sector, a crackdown on private enterprise and weakening demand for Chinese exports.

The premier also gave greater emphasis to institutional reform compared with last year. This came after state media reports on Tuesday that President Xi Jinping plans for an “intensive” and “wide-ranging” re-organization of state-owned enterprises (SOEs) and Communist Party entities.

Xi, who secured a precedent-breaking third leadership term in October, is planning to resurrect the Central Financial Work Commission, two people briefed on the matter told Reuters. That signals Xi’s push to increase oversight of the financial sector.

To promote economic growth, China’s top planning agency also said on Sunday the country will advance reforms in key areas and continue to open up to foreign investment.

“We will carry out critical reform tasks to remove institutional barriers that stand in the way of promoting development,” the National Development and Reform Commission (NDRC) said.

China will formulate and implement a plan for another round of state-owned enterprise reform, and move faster to help Chinese companies to become “world-class,” the NDRC said.

China seeks to “create a positive environment in which SOEs show great initiative, private enterprises are not afraid to blaze new trails, and overseas companies feel free to make investment,” it said.

The NDRC also said China will make better use of foreign investment and accelerate China’s transformation into a “powerful trading nation.”