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Vice Chairman of China Insurance Regulatory Commission: Six Big Risks in the Financial Industry

At the China Development Forum (March 18-20 in Beijing), Chen Wenhui, Vice Chairman of the China Insurance Regulatory Commission (CIRC) listed six big risks that China’s financial industry faces:

1. Leaving the real economy and moving to the virtual economy. In 2016, the financial industry generated a net profit of 2.03 trillion yuan (US $300 billion), on par with the net profit of 2.32 trillion yuan from all State-Owned Enterprises (SOEs). This shows that the financial industry runs itself very well, but it also shows a trend toward putting money in the financial market to make money.

2. Deviating from the primary business focus. Some financial organizations forget their own business field and move to another field to make quick money. {Editor’s note: Chen may be referring to some insurance companies that invest heavily in the stock market.}

3. Failing to manage the company effectively. If a financial company cannot manage itself well, a few people might gain control or even become those certain people who dispense cash or establish the financial platform. Then if the company needs to be bailed out, the whole society might end up paying for the acts of those few people.

4. Aggressive management to pursue higher return.

5. An unbalanced allocation between debts and assets.

6. Cash Flow risk. Several of the above risks can cause financial organizations to have cash flow problems.

Source: QQ, March 18, 2017
http://finance.qq.com/a/20170318/019372.htm

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