China news agency, Beijing, October 17 After the first “appearance” at the National Financial Work Conference this year, the Financial Stability Committee of the State Council (“the Financial Stability Development Committee”) has rarely been mentioned by the Chinese authorities.

Recently, PBOC Governor Zhou Xiaochuan made a speech at the 2017 G30 International Banking Symposium. For the first time, he referred to the Financial Stability Development Committee. He pointed out that the commission will focus on four issues in the future: the shadow banking, the asset management industry, Internet financial and financial holding company.

Financial Stability Development Committee's direction of attention revealed just recently. Why the sword refers to the four major issues?

Take shadow banking as an example, its product structure is complicated in design and information disclosure is not sufficient. It is not restricted by the capital adequacy ratio and the deposit reserve system like the commercial banks, and is not protected by the deposit insurance system.

Look at the asset management industry. Statistics show that, in recent years, China's asset management business has developed rapidly. At the end of March 2017, the total assets under management of various financial institutions totaled about 106.6 trillion yuan, and the share of asset-backed products in the banking, securities and insurance sectors accounted for 48%, 50% and 2% respectively. At present, due to the fact that the legal relationship is not clear enough and the regulatory standards are not unified enough, some of the asset management products have complicated structure, nested investment, leverage overrule and regulatory arbitrage. Improving the supervisory system of asset management business further is of great significance for safeguarding China's financial stability and protecting the legitimate rights and interests of investors.

Another example is the Internet finance industry and financial holding companies that exist the business of unlicensed businesses, during which there may be illegal transactions such as related transactions, and China's cross-sectoral trade is lack in corresponding regulatory policy.

All the above issues are related to the financial chaos caused by the cross-contamination of the risks brought about by the “false” financial innovations in China at present. Internal or non-compliant operations will lead to asset bubble expansion and excessive leverage to induce systemic financial risk issues. It is imperative and top priority for the Financial Stability Commission to name these four major issues a hit.

Tian Lihui, head of the Institute of Financial Development at Nankai University, said that with such a unified coordination mechanism “the Financial Stability and Development Commission”, the situation of “administering floodwaters in Kowloon and fighting each other” in the regulation can be effectively prevented so as to prevent under-regulation or over-regulation and effectively and orderly guide the capital to serve the real economy.