Gains from China's new financial standards plan foreseen

A new plan to advance standardization in the financial sector during the 14th Five-Year Plan (2021-25) period will facilitate the high-quality development of China's financial services industry and help improve the development efficiency of the real economy, said experts.

The plan was jointly released by the People's Bank of China, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission on Tuesday night.

It stated a standards system compatible with modern finance should be built by 2025. The document is expected to improve standardization in a wide range of areas, including supervision, risk prevention, financial technology, green finance and digital currency.

Chen Li, chief economist at Chuancai Securities, said the plan will facilitate supply-side reform and overall economic development. As the digital economy gets more deeply integrated with the financial sector, more business and technology innovations are likely to be nurtured. Under such circumstances, world-class standards can help both financial intermediaries and companies.

The plan stressed that data governance capability should be further improved within the securities and futures industries. Once improved, overall risk prevention capability in the two industries will be largely enhanced, said Guo Yiming, investment director of Jufeng Investment Information.

Supervision will also become more digitalized and intelligent. More importantly, it will help prevent systemic risks, he said.

Efforts to launch the national digital currency will be continued, the plan stated. The framework for the digital yuan－e-CNY－should be further completed by building safe and reliable infrastructure, improving the issuance and storage system, the registration center and the payment communication models, and enriching the application scenarios.

Buoyed by the contents of the new plan, A-share companies with businesses that may benefit from the central bank digital currency soared by an average 8.67 percent on Wednesday, while the benchmark Shanghai Composite Index climbed 0.79 percent to close at 3479.95 points. These companies attracted about 1.67 billion yuan ($262 million) worth of net capital inflows before market close.

Analysts from China Merchants Securities wrote in a report in mid-January that cross-border payments in digital yuan are likely to be explored at a faster pace. Related trials are underway at the Beijing 2022 Olympic Winter Games venues.

A new type of payment ecosystem based on the digital yuan is also likely to be shaped more rapidly, with more digital business models thus bred. Investors, therefore, should look for opportunities in A-share companies specializing in cross-border payments, new types of mobile phone-based payments, e-CNY wallets and banking system upgrading.