Home > Font Big Medium Small
CCDC President Chen Gangming Addressed the 5th F10 Forum Opening Ceremony

Distinguished guests and dear friends,

Good morning! You are welcome in this month’s F10 Forum to discuss the issue of financial risk prevention. Around this theme, we have arranged a series of topics for discussion and have invited some experts from government bodies, market participants and research facilities, who will inform and give instructions to us from different aspects. This forum has attracted the broad participation of market representatives, with a total of more than 200 people gathering here. On behalf of the organizer ----CCDC, I would like to express my heartfelt thanks to you!

Financial security is an important part of national security and an important foundation and condition for the steady and healthy development of the economy. At present, the uncertain events and diversity challenges of the world economy are more complicated, while some of the domestic risks may interwine each other and materialize abruptly, which highlight the importance and urgency of resolving financial risks and maintaining financial stability. This fifth national financial work conference of this year, focusing on the overall situation of economic and social development and the overall situation of national security, underscored the importance of the initiatives to actively prevent and resolve systemic financial risks. Last week, General Secretary Xi Jinping in the Nineteenth CPC Congress Report once again stressed that we should secure a sound financial regulatory system and hold the bottom line of not occurring systemic financial risks.

To prevent and resolve financial risks, we must establish the correct concept of financial security. First, we shall accurately understand the financial situation and recognize the relationship between internal and external risks. From the domestic perspective, China’s economic cyclical, structural and institutional problems overlap each other, and financial risks saw a fast accumulation. These internal risks are the dominant aspects of contradictions, while external risks ultimately take a toll through internal risk factors. From an international perspective, since the financial crisis in 2008, the major economies implemented nearly a decade of quantitative easing monetary policy, with cheap capital flooding the global financial markets. With the a broad-based recovery of the global economy gaining a firm foothold and quantitative easing monetary policy being gradually withdrawn, the global economic and financial imbalance and the structural fragility of emerging markets may induce serious capital flows and financial shocks to these countries.

Second, to prevent the risks, we shall look at the risks in a realistic way and objectively understand the relationship between risk disclosure and risk accumulation. On the one hand, we need to correctly recognize the risks and should not neglect them. Financial risk is one of the basic characteristics of modern finance and an inherent attribute of financial activities. Therefore, we shall not fear or refuse to deepen the financial market because of the risks, nor blindly pursue the high-speed development whilst ignoring the financial risks and over relaxing the risk control. Only by objectively facing the risks can we better assess and prevent the risks. On the other hand, financial risk cannot be simply linearly interpreted and over-exaggerated. Since the 18th CPC National Congress, the central government has attached great importance to financial work by adopting a series of measures to strengthen financial supervision and guard against financial risks. These measures have successfully lowered the financial leverage ratios, contained some of the financial disorderly trends, and further deepened the supply side reforms. The overall financial sector operation is stable and the financial risks are generally controllable. In the process of recognizing the risks, if we don’t look at the risks in a realistic way, we will mistakenly believe that the risks are caused by the inspections, which confuses the process of exposing risks with risk accumulation itself. Recently, some international agencies decided to lower the sovereign credit rating of China. Their adjustments reflect in part the absence of objective recognition of risks.

Third, to guard against the risks, we should pay attention to our methodologies, making a comprehensive use of system theory and priority theory. The risks of the financial sector can emerge from a wide range of areas, and they can materialize in a sudden, contagious and dangerous way. The system theory requires, firstly, the strict prudence on all types of risk objects, including both “black swans” and “gray rhinos”. Second, it calls for the establishment of a comprehensive risk management mechanism, covering risk identification, measurement, assessment, monitoring, reporting, and control/mitigation. Third, it requires the establishment of risk management toolbox and coordination mechanism. In macroeconomic policy areas, the coordination of fiscal policy, monetary policy and industrial policy can help, while in financial supervision areas, the coordination of monetary policy, macro-prudential policy and micro-prudential policy will bring benefits. On this basis, strengthening supervision focusing on key areas, key risks and key problems, conducting risk prevention in a scientific way, and effectively improving the financial security remain critical.

The bond market is one of the core basic parts of the financial market. In response to the tasks of improving efficiency of servicing real economy and promoting the opening up to the world market, in the area of preventing bond market risks, it is of utmost importance to consolidate the market foundation of the stability and introducing risk control tools. (1) To speed up the introduction of safe and efficient liquidity tools and the three-party repurchase and central bond lending mechanism to optimize liquidity risk management; (2) to continuously improve the information disclosure and credit rating system to deepen the information disclosure-based bond issuance mechanism; (3) to improve the standardization and legalization of credit risk resolution system, to enhance the market discipline and risk sharing mechanism, and to strengthen the supervision and coordination, so as to safeguard the legitimate rights and interests of investors; (4) to further improve the compilation of bond yield curves, especially the treasury bond yields curves as market benchmarks, to further improve the pricing system that captures market developments, and, based on the pricing system, to conduct the market leverage and risk monitoring; (5) to continuously improve the collateral management mechanism by deepening and widening the application of bond collaterals, and to use marking to market to help enhance the risk management of the entire market; (6) ​​to steadily expand the application of interest rate, exchange rate, credit risk hedging tools to enhance market participants’ resilience the stability of market development.

Preventing the risks in the bond market requires a greater role of the market infrastructures. CCDC, as a national core financial infrastructure, has its inherent mandate to deal with the financial risks and shoulders the mission of maintaining financial security. Indeed, CCDC has always taken “containing risk and safeguarding the bottom line” as the foundation of the institution, and for twenty years it has made continuous contributions to the rapid and steady development of China bond market. First, CCDC ensures the safe and stable operation of the bond market and helps the bond market, as a main powerhouse of direct financing, provide much needed services to the real economy. Second, CCDC follows the international financial infrastructure standards, keeps improving its own risk management, and promotes the modernization of China’s financial market infrastructure. Third, CCDC has built a transparent, convenient and diversified financial market service platform and has been strengthening the market monitoring to prevent risks, enhance supervision and protect investors’ interests. Fourth, CCDC has been developing a bond pricing system to to provide tools to the market institutions in their risk measurement, compliance and risk control, and performance evaluation. Fifth, CCDC has created a financial market risk management center, which provides centralized, automated, professional bond collateral management services; the application of these products covers all types of financial transactions as well as monetary policy, fiscal policy and foreign exchange policy operations, and the services have gain some tractions in overseas markets.

I hope this forum can help build an effective communication platform, and I wish this forum a very good success. Thank you!

    Publish on :10/26/2017 13:52
Copyright ©1998-2020. CHINA CENTRAL DEPOSITORY & CLEARING CO., LTD. 京ICP证030355号
Address: No.10, Finance Street, Xicheng District, Beijing, P.R.C Zip Code: 100033 Web Editor: 86-10-88170634 88170619