China must strengthen regulatory oversight and control the overall amount of money supply to guard against mounting financial risks in the economy, a top economic official said on Sunday.

Yang Weimin, the deputy director of the Office of the Central Leading Group on Financial and Economic Affairs, said the “extremely arduous” task was necessary to head off the financial risks in the Chinese economy that were becoming “progressively visible”, Reuters quoted the Securities Times business newspaper as saying.

“Firstly, the overall money supply must be controlled, and the printing of money cannot be excessive,” the Securities Times quoted Yang as saying on the sidelines of an annual meeting of the Chinese People’s Political Consultative Conference, the Communist Party’s largely ceremonial advisory body to parliament. “Furthermore, there should be stronger oversight rather than the relaxation of financial oversight.”

Among a raft of major issues that needed to be tackled to combat financial risk were the continued reduction of overcapacity and ‘zombie companies’, controlling debt levels and keeping property markets stable, Yang said.

Beijing’s willingness to curtail big-spending conglomerates as it cracks down on financial risk was dramatically demonstrated in the past fortnight, when the government took control of Anbang Insurance Group Co Ltd and prosecuted its chairman.

The South China Morning Post reported on Friday that a Shanghai government agency has taken control of CEFC China Energy, the private firm that has agreed to buy a $9.1 billion stake in Russian oil major Rosneft. CEFC denied the report and said it was running its operations as normal.

Anti-Graft Campaigns

China’s national legislature, scheduled to convene on March 5, will deliberate on a draft supervision law designed to lay a legal foundation for an upgraded anti-graft taskforce, Xinhua reported.

Upon adoption of the law, a new supervisory network would be established, consisting of supervisory commissions at the national, provincial, city and county levels, with legally defined duties, liabilities and protocols.

During the upcoming first session of the 13th National People’s Congress, a national supervisory commission is expected to be established with a chief elected and senior officials appointed.

“The reform of China’s supervisory system is aimed at enhancing the Party’s unified leadership over anti-corruption campaigns and covering all state functionaries,” Zhang Yesui, spokesperson for the session, said at Sunday’s press conference.

The national supervisory commission is an anti-graft institution with Chinese characteristics, while the draft supervision law is an anti-graft legislation in nature, Zhang said. “With the new law, the country will pool supervisory powers that used to be divided, and form a centralized, unified and efficient state supervisory system,” said Prof. Ma Huaide, vice president of the China University of Political Science and Law.

Pilot Projects Successful

Although the legal and institutional building of this new system is still going on nationally, pilot projects tested at the local level have achieved notable progress.

Since November last year, pilot reforms of the supervisory system in Beijing, Shanxi and Zhejiang have been expanded nationwide.

Sharing offices and staff with Party disciplinary inspectors, the newly founded supervisory commissions incorporate existing supervisory, corruption prevention and control agencies within governments and procuratorates.

At the recently concluded annual legislative sessions of provincial-level people’s congresses, all directors of provincial-level supervisory commissions were elected.

The first significant change after the establishment of supervisory commissions is an increase in the number of state functionaries under effective surveillance. New commissions place civil servants, staff of judicial agencies, executives of state-owned enterprises, senior staff of public institutions and mass organizations under one supervisory network.

In Beijing, one of the three localities that started the reform first, the total number of officials under supervision increased from 210,000 before the reform to 997,000 as of December last year, said Zhang Shuofu, head of the city’s supervisory commission.

East China’s Zhejiang Province and north China’s Shanxi Province, the other two pioneer provinces, reported an increase of 83.02% and 67.5% respectively.

About 18% of these officials are not members of the Communist Party of China, according to Ren Jianhua, head of the Shanxi provincial supervisory commission.

“Such an extensive network leaves no loophole and serves as a powerful deterrent against corruption,” said Prof. Zhao Lei with the CPC Central Committee Party School.