China's financial regulators are gathering in Beijing in a once-in-five-years huddle that many expect will formalize a greater coordination role for the central bank, but will stop short of pushing changes that could potentially destabilize the economy.
The National Financial Work Conference is strictly closed-door, but its outcome will be widely watched.
At the inaugural conference in 1997, Beijing set up China's insurance regulator. The second in 2002 saw the creation of the banking regulator. China Investment Corp [CIC.UL], the sovereign wealth fund, was formed after the 2007 conference.
The most recent meeting in 2012 yielded no significant policy change as the country's top leadership went through a once-in-a-decade transition, with Xi Jinping taking Hu Jintao's place as the leader of the People's Republic of China.
Ahead of the once-every-five years congress of the Communist Party in autumn this year, stability of the economy and society is key, with Xi expected to further consolidate his hold on power.
Economists say the meeting this weekend will likely focus on how the central bank can better coordinate with the China Banking Regulatory Commission (CBRC), the China Securities Regulatory Commission (CSRC) and China Insurance Regulatory Commission (CIRC) to tackle weaknesses in the financial system.
A broader mandate?
"We can expect the People's Bank of China (PBOC) to be given more power to oversee and coordinate, given the growing amount of financial products that cross the boundaries of the three regulators," said Julian Evans-Pritchard, China economist at Capital Economics.
"This shift is positive as the PBOC is probably the best placed to do this since it had the broadest mandate of ensuring financial stability."
PBOC, CBRC, CSRC and CIRC did not immediately respond to requests for comment.
Investors have long supported the idea of a unified body to oversee the various regulators that oversee the different parts of the financial system, though there is little sign that a super-merger is imminent.
In 2015, a poorly coordinated response to China's stock market crash not only did not help end the bloodshed, the government's competence came under scrutiny. Premier Li Keqiang openly criticized regulators for not responding sufficiently.
In March this year, CBRC's new chief Guo Shuqing said the banking regulator is collaborating with other regulators to create a framework to close loopholes in rules for cross-market financial products.
"Different regulators, different laws, different rules have caused some chaos," Guo said.
Economists expect the meeting this weekend to set the tone of future financial regulations, but warn against expectations for major shifts in policy.
"The core of the meeting is to defuse current risks, and the defusing itself shouldn't cause any systemic and regional risks," said Zhang Ming, chief economist at Ping An Securities.
China's top leadership has identified curtailing financial risks as a top priority this year after a sharp rise in overall leverage.
The conference is expected to tackle China's $7.7 trillion shadow banking sector. The loosely regulated industry includes non-bank forms of credit such as trusts and wealth management products (WMPs).
Earlier this year, PBOC included banks' off-the-balance-sheet WMPs in its examination of broad credit in its Macro Prudential Assessment (MPA) for the first time, to give authorities a better sense of potential risks to the financial system.
Economist also say that further opening up China's financial sector will be on the meeting's agenda.
Re-disseminated by The Asian Banker from Reuters