China is in a good position to defuse financial risks, Premier Li Keqiang said Wednesday. Last year, the non-performing loan ratios of some financial institutions increased in China because of the difficulties in some enterprises and some sectors, Li said at a press conference following the conclusion of the annual parliamentary session.
But capital adequacy ratio of China's commercial banks exceeded 13 percent, below the international warning line, and banks' provision coverage ratio was above 180 percent, higher than the level of 150 percent set by the government, Li added.
The fairly high corporate debt ratio is no new problem in the country, Li said, as Chinese companies still raise capital mostly indirectly. But "we also have other market-based tools at our disposal to help bring down corporate debt ratio," Li said.
China has a high savings rate, and the government is determined to press ahead with building a multi-layered capital market, he said. "We can also use such market-oriented format as debt equity swap to help bring down corporate leverage ratio," the premier said.
Due to multiple factors, there were some unusual fluctuations on the stock market last year, according to Li. "Relevant government departments took coordinated measures to stabilize the market and prevent systemic financial risks," Li said.
"Our measures achieved the desired purpose." China needs to reform its financial regulation system, including having whole coverage of financial regulation, as the country sees an increase of financial innovation products, Li said, noting that there should be enhanced and authoritative coordination in the regulation. But "it will be a process to put in place a full-fledged financial regulatory regime," he added.
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