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Official: financial dept not involved in ministry reform
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The trend toward advocating the establishment of a super financial ministry may be over.

The reform of ministries and commissions will not touch upon any financial departments, said Cheng Siwei, vice chairman of the Standing Committee of the National People's Congress (NPC), China's top legislature.

"There's no super financial ministry or commission, here or overseas," Cheng said on March 3 during an interview with the 21st Century Business Herald.

He said that domestic and overseas experience indicates that the constitution and the execution of monetary policies along with financial regulations should be independent respectively in order to guarantee an independent monetary policy. China is unlikely to combine the Bank of China and regulatory institutions again.

He also said that mixed operations and comprehensive regulations are a trend but currently mixed operations are on trial. Due to many complicated reasons optimal conditions for comprehensive regulations have not yet matured. Cheng added, "The present National People's Congress didn't refer to the issue either."

At the beginning of 2007, the third national finance conference only emphasized strengthening the coordinative mechanisms for financial regulations. Nothing was mentioned about establishing a "financial regulatory coordination commission", or a "super financial ministry or commission."

Cheng pointed that the present hot topic of "super financial ministry" is incorrect.

He said the Chinese banking, insurance and securities regulatory commissions are public institutions, not ministries or commissions, and not "governmental departments." He also said, "The government performs administrative rights, while the regulatory institutions are responsible for the market supervision." The People's Bank of China, the country's central bank, is responsible for the monetary policy to guarantee its independence. It "can't be a ministry", which is subordinate to the government. There's no such financial ministry in any country.

He said, in light of the future trend, the three regulatory commissions would perhaps be combined into one unified coordination commission; the central bank would function as a Federal Reserve, but it would not have any regulatory functions.

It's "improper" to combine any monetary policy constitution and financial regulation together again, Cheng said definitely.

Wang Jun, China's chief representative to World Bank, said that the combination would only serve as a back-up. To plan the financial coordination as a whole, a vice-premier-level financial committee could be established.

He added, "The committee is a financial coordination institute, it does not represent the united regulations." Its aim would be to advocate integration of financial services, strengthen the controlling function and promote the harmonious development of China's economy throughout society.

Cheng Siwei pointed out that at present it's too early yet to enact any comprehensive regulations in China. "There's still a big gap in the regulating ability between China and foreign countries. Talents reserve and technological information systems need to be strengthened. Besides, a large number of financial institutes are still owned by the state."

Also, a legal framework is needed to implement comprehensive regulations, Cheng said, adding that "mixed operations and comprehensive regulations are the ultimate target of China's financial reform."

(China.org.cn by Zhou Jing, March 6, 2008)

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