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Western financial markets seriously disconnected with real economy: China banking regulator

Financial markets and the real economies have been “seriously disconnected” in many Western developed countries since the outbreak of the COVID-19 pandemic, and China’s regulators are worried that the situation will have to be adjusted, according to a press conference held by China Banking and Insurance Regulatory Commission on Tuesday.

According to Guo Shuqing, chairman of the commission, the regulator is very worried that the bubble in the financial market in the West might burst, and it might spill over and affect China’s financial market.

“China’s financial market is highly linked to foreign markets, and there is a continuous influx of foreign capital,” Guo said on Tuesday, adding that so far the pace and size of the foreign capital influx is “still under control.”

Over the last few months, a slew of concerns have been raised about the disconnect between real economy and the market performance. The markets have gained significantly from the lows at the beginning of the pandemic, and post a sharp correction even as the Western economies went into a contraction zone.

In the US, the SP 500 index has risen to more than 3,900 from around 2,237 in the same month last year, despite the fact that many small businesses are struggling, and more than 10.7 million people are unemployed, according to US Labor Department data.

On Tuesday’s press conference, Guo also noted that all financial services, including traditional banking and the fintech, will have to comply with relevant rules and regulations without exceptions. For fintech, financial innovation is encouraged, but must be confine within the regulations.

“We don’t think there are any financial services that are not suitable for fintechs,” Guo said, adding that he believes that the sector will have a healthier development after some adjustments.
Source: Global Times

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