Move aims to prevent monopolistic behavior and irregular investments

Chinese financial regulators will step up efforts to prevent the irregular expansion of capital to protect the interests of the public and smaller businesses, officials and experts said on Wednesday.

Capital expansion and financial innovation that meet the needs of the people and the real economy will be encouraged, while those aiming to form market monopolies or take advantage of regulatory loopholes will face crackdowns, they said.

Yi Huiman, chairman of the China Securities Regulatory Commission, the top securities regulator, said the country must pay more attention to the regulation and guidance of capital amid ongoing registration-based reforms, which aim to make capital market mechanisms play a bigger role in IPO process.

Stricter regulation of mergers and acquisitions in some sensitive areas will be adopted to contain risk spillover, and different stakeholders should step up concerted efforts to establish a system of preventing the irregular expansion of capital, Yi said.

He added that the flow of capital is important for pushing forward technological innovation and high-quality development, but the nature of capital to expand on its own could lead to monopolies and harm the interests of consumers and smaller businesses.

Yi made the remarks at the Annual Conference of Financial Street Forum 2021 in Beijing on Wednesday, after the Xinhua News Agency published an interview with Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, on Tuesday that also underlined the necessity of avoiding irregular expansion of capital.

Guo said in the interview that the country faces noticeable problems of monopolies and unfair competition in some areas of the financial sector, and efforts to address such problems have had some success.

For instance, some fintech activities have emerged that call themselves financial innovations but actually illegally raise money from the public, invest in nonstandardized products and circumvent regulatory supervision, Guo said.

Among multiple efforts to address these problems, financial regulators have raised over 1,000 related issues involving 14 internet platforms, with half of them having been solved, and more pronounced progress is set to be achieved by the end of the year, he added.

The key to such efforts lies in both ensuring market players comply with laws and regulations and promoting financial innovations under the principle of "prioritizing the people's interests", Guo said.

"Regulations and development are both important. Strengthening regulations doesn't mean that development will be impeded," he added.

Hu Zhihao, deputy director of the National Institution for Finance & Development, a Beijing-based think tank, told China Daily that the top financial regulators' remarks came amid the global trend of strengthening regulation over big tech companies' capital expansion.

Global tech giants have expanded their footprint into various industries in recent years, including the financial industry, but are yet to be subject to seamless, comprehensive supervision, giving rise to risks and stepped-up regulatory efforts, Hu said.

"Regulators, traditional financial institutions and tech giants should work together to reach a new balance where tech firms can facilitate the digital transformation of financial institutions in a sustainable manner with controllable risks," he said.

Capital expansion and financial innovations that cater to the public's growing expectations of more balanced regional development and a narrowed household wealth gap will be encouraged, while those going in the opposite direction may face tougher crackdowns, Hu added.