More Turf Battles in China As Reformers Expand Reach

This was out late last week in the Financial Times: China bank regulators caught in turf war
In recent weeks the central bank, which has responsibility for overall financial stability in China, has expressed frustration at the CBRC’s unwillingness or inability to rein in the off-balance sheet activity of the state-controlled banking system, which has ballooned in recent years.

The PBoC also feels the CBRC is too close to the state banks and has failed to get a handle on the scale of problem loans at many of the country’s smaller lenders.
Yet another example of the reformers in the PBOC hitting a political roadblock, though these are fewer and father apart lately. The PBOC slammed the report.

Last year the PBOC battled SAFE: SAFE and PBOC Battle For Control. That turf battle led to the PBOC proposing a new agency to take power away from SAFE. (The PBOC Strikes Back)

This is all in keeping with the rise of the reform camp since the ouster of Bo Xilai. Economic reform jump started immediately following the fall of Bo Xilai and it has been picking up speed ever since. The corruption crackdown is part of the package. More background with several links to prior discussion here: Political Battle Behind the Scenes Still Ongoing in China; Economic Reform Isn't Solely Economic Reform.

Look back over Wen Jiabao's criticism of the state owned banks in light of what his successor, Li Keqiang, is allowing to take place now. I wrote this back in April 2012:
A private financial system will compete with state-owned banks for deposits. It will pay higher interest rates and charge higher rates for loans, to better credit risks, while the state-owned banks continue make bad loans to politically connected firms. Eventually, this will start impacting the state banks and instead of being regulated by politics, they will be regulated by markets.
I couldn't predict what would unfold, but the rapid growth of Alibaba's Yu E Bao money market and the PBOC's tacit approval of these changes is the fulfillment of Wen Jiabao's attack on the state owned banks, as is the private bank trial reform. The economic slowdown underway is part of economic reform. It's not a bug, it's a feature.

Relevant: Downside Price Targets on Yuan Emerge; Beijing Youth Daily Calls For the Market to Regulate Housing

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