Collaborative central-regional governance of local finance and the corresponding rule of law path

Abstract

The central-regional relationship is a crucial factor in determining the performance of local financial regulation in China at the institutional level. Centralized decentralization, local competition and financial system reforms have constituted behavioral constraints on central financial regulators and have forged the increasing shape of local finance and its regulation. However, the central and local parties have different perceptions and demands for the financial industry and its regulation, and the “imbalance in central-regional relations” at the levels of allocation of regulatory legislative power, distribution of regulatory power and responsibility, handling of problematic financial organizations. In addition, provision of public products for financial regulation has become the root cause of many accumulated shortcomings in the practice of local financial regulation. The concept of “collaborative central-regional governance” should be taken as the concept of the rule of law construction for local financial supervision, and a professional committee should be set up under the Financial Stability and Development Committee of the State Council as the entity organization of the collaborative governance between the central government and the local government, so as to improve the definition and distribution of supervisory functions and specific supervisory powers and responsibilities between the central government and the local government. In particular, through implementing the regulatory model of “functionalism, typology and risk control” in the asset management business of local financial organizations, improving the rectification of local problematic financial organizations by taking the balance between regulation, industrial interests and consumers’ rights and interests as the core, and strengthening the infrastructure construction and public product supply of local financial regulation in the field of information and credit regulation, the concept can promote the modernization of financial governance system and governance capacity.