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Regulator calls for tougher market reform

By Wang Xiaotian (China Daily)

08:48, November 30, 2012

China's financial market reforms should be supported by overall reforms that provide complementary policies, instead of relying solely on moves such as altering interest rates or currency exchange rates, according to a senior banking regulator on Thursday.

Cai Esheng, vice-chairman of China Banking Regulatory Commission, said an overhaul that contains supporting policies from other economic and social aspects should be emphasized while promoting market-oriented financial reform.

"And each side should be clear about their responsibilities - currently it seems there is a 'dislocation' in terms of the overall reform," he said at a forum in Beijing, sponsored by the financial magazine, Caijing.

Cai said a market exit mechanism for financial institutions is crucial for any further progress to be made to deepen the reforms.

"But without complementary policies in other areas, such as social management, and employment security, the effects of establishing regulations would be much reduced."

In a financial five-year development plan released in September, the government promised to establish procedures that will allow financial institutions to exit the Chinese market.

It called for the establishment of a deposit insurance system and the adoption of bankruptcy law for financial institutions, but didn't specify when the plans will be put into effect.

China has been vowing to further liberalize interest rates and the exchange rate of its currency, the yuan, for at least a decade, said Cai, but without reform of other economic and social policies, they cannot be realized.

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