China asks Britain for advice on creating financial super-regulator

Sat May 14, 2016 8:32pm EDT
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By Michelle Price and Benjamin Kang Lim

HONG KONG/BEIJING (Reuters) - China has asked Britain for advice on plans to create a financial super-regulator, as it looks to improve financial oversight following last year's stock market crash, sources with knowledge of the talks told Reuters.

The discussions between representatives from China and the UK Foreign Office and Treasury highlight Britain's burgeoning relationship with Beijing on financial issues, notwithstanding this week's gaffe by Queen Elizabeth, who was caught on camera grumbling that Chinese officials accompanying President Xi Jinping on a visit to the UK last year had been "very rude to the ambassador".

The talks signal Beijing's growing willingness to seek outside help to improve regulation of its financial infrastructure, in a bid to increase transparency, reduce systemic risk, and stop companies exploiting loopholes.

Several Chinese and British sources with direct knowledge of the talks said Beijing had sent delegations to London to study the UK regulatory framework, with two sources citing a visit in the first quarter.

UK government representatives also visited Beijing last month to discuss financial, economic and regulatory issues, two sources with knowledge of the visit said.

Weaknesses in Chinese regulation were exposed last summer when China's stock markets lost a third of their value in a month, having soared 150 percent in the previous 12 months.

Government and regulators rushed out a series of measures to arrest the crash, including limiting short-selling, stopping new listings and strong-arming big funds to buy more stocks.

The interventions were widely criticized for over-riding market mechanisms, poor inter-agency coordination and creating moral hazard by implying government support.   Continued...

Investors look at computer screens showing stock information at a brokerage house in Shanghai, May 26, 2015.  REUTERS/Aly Song/File Photo