March 9, 2023: China intends to overhaul its fiscal and regulatory system by consolidating ways of the central bank and securities regulator under a recent entity while doing away with the existing banking regulator.

On Tuesday, according to a draft released as part of China’s yearly parliamentary meeting, the “Two Sessions.” Delegates are set to approve a final version.

The changes follow similar adjustments to China’s administration structure that have occurred every five years over the previous few decades. The moves also come as Beijing has surged regulation on parts of the economy that had increased quickly, with little oversight.

The latest plan calls for establishing a National Financial Regulatory Administration, replacing the China Banking and Insurance Regulatory Commission and expanding its part.

The recent regulator is set to most financial industries except for the securities industry. The draft said that responsibilities include protecting financial consumers, strengthening risk management, and dealing with law violations.

The China Securities Regulatory Commission’s investor protection responsibilities are set to shift to the new financial regulator.

The People’s Bank of China’s responsibility to protect consumers and regulate finance holding companies and firms will shift to the new administrator.

“China’s regulatory reforms will strengthen regulators’ capability to establish and enforce a unified regulatory framework and decrease the room for regulatory arbitrage,” David Yin, vice president and high credit officer at the Investors Service, said in a note.

“In addition, the reform aims to strengthen the central administration’s control of financial regulation at the local government level, improving regulatory enforcement and reducing local administration’s influence on financial institutions,” Yin said.

Hence, the draft wanted the PBoC to consolidate its local branches with greater central control and change the securities regulator’s aim within the State Council from the same as the council’s Development Research Center to that of the customs group.

“The consolidated fiscal, regulatory body of China is a paradigm shift to ramp up oversight of its strong financial system,” stated Winston Ma, an adjunct law professor at New York University.