What’s new: China’s Ministry of Finance told the country’s state-owned financial institutions to concentrate on their core business while reducing subsidiary portfolios. The move is part of a government effort to improve state capital management and boost efficiency.
In a directive, the ministry said state-owned financial institutions operating in competitive sectors should get rid of noncore businesses or investments with tiny returns. State-owned financial companies can control no more than one domestically licensed subsidiary in one particular financial service sector. Exemptions can be applied to certain financial investment companies such as China Investment Corp. and Central Huijin Investment Co.
The companies should enhance management and oversight of their subsidiaries and regulate transactions among connected parties, the ministry said.
What’s the context: The directive fleshed out requirements set for China’s state-owned financial institutions in a 2018 policy document that outlined the regulatory framework for state capital.
It is part of a series of specific policies issued this year to regulate the responsibility, business operations and management of state-owned financial companies as the country steps up supervision on capital management to fend off financial risks.
Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@caixin.com).
