IMF Executive Board Concludes 2024 Financial System Stability Assessment with the People’s Republic of China
IMF News, April 4, 2025
Source details
- Canonical URL
- IMF Executive Board Concludes 2024 Financial System Stability Assessment with the People’s Republic of China
Other formats
Bibliographic details
- Published: April 4, 2025
Key facts and metadata
- Press Release No. 25/090
- Date: April 4, 2025
- Press officer: Ting Yan
- Phone: +1 202 623-7100
- Contact email: MEDIA@IMF.org
Major findings of the 2024 FSSA
- Since the last FSAP in 2017, the authorities have made notable progress in:
- strengthening financial supervision and regulation;
- continuously implementing international regulatory standards;
- enhancing systemic risk monitoring.
- Regulatory reforms led to important reductions in risks arising from non-bank financial institutions.
- Bank capital and liquidity levels appear adequate overall, but financial stability risks are elevated.
- Stress tests indicate the banking system would remain resilient in an adverse scenario.
Elevated vulnerabilities and sources of risk
- Property sector downturn: rising vulnerabilities stemming from ongoing property sector adjustment.
- Local government financial vehicles (LGFV): widening strains in highly leveraged LGFVs warrant attention; a more comprehensive solution to address the LGFV debt overhang is needed.
- Economic slowdown channels: declining economic growth could affect credit portfolio quality.
- Profitability pressures: accommodative monetary policy is weakening banks’ organic profitability, with smaller banks—particularly those with riskier business models—being more vulnerable.
- Data and analytics gaps: need to strengthen data quality, granularity, collection, and accessibility to enhance systemic risk assessment.
Policy recommendations and priority reforms
- Strengthen the financial stability framework:
- Further strengthen the draft Financial Stability Law.
- Designate an independent and properly resourced lead resolution authority.
- Build greater crisis management capabilities.
- Introduce an effective emergency liquidity assistance framework.
- Enhance regulation and supervision:
- Continue implementing FSSA recommendations to strengthen risk-based supervision, financial regulation, and systemic risk monitoring.
- Boost supervisory resources and independence.
- Cultivate specialist skills and enhance inter-agency cooperation.
- Apply additional scrutiny to mid-size and smaller banks and some bank business models.
- Address LGFV and property sector stress:
- Pursue a more comprehensive solution to the LGFV debt overhang.
- Continue implementing measures to contain impacts from the property downturn and LGFV financial stress; many such measures were introduced after the FSAP took place.
- Enhance analytical capacity:
- Allocate additional resources and further strengthen analytical capacity to ensure regulatory frameworks remain commensurate with the scale and complexity of the financial system.
- Climate and inclusion:
- Continue bolstering capacity to analyze climate risks; authorities commended for being at the forefront of green finance.
- Continue advances on financial inclusion.
Executive Board assessment
- Executive Directors broadly agreed with the analysis and recommendations of the FSSA for China.
- Directors commended significant progress since the 2017 FSAP, including stronger financial sector oversight, operationalization of the macroprudential framework, and rein in of risks in the nonbank financial intermediary sector.
- Directors were broadly reassured by stress test findings but emphasized:
- need for improved data quality and accessibility;
- close monitoring of mid-size and smaller banks;
- continued attention to risks from the property sector adjustment and LGFVs.
- Directors encouraged continued efforts to strengthen crisis management and resolution frameworks in line with international best practices.
Context on FSAP and FSSA
- The Financial Sector Assessment Program (FSAP), established in 1999, is a comprehensive and in-depth assessment of a country’s financial sector.
- FSAPs provide input for Article IV consultations and enhance Fund surveillance.
- FSAPs are mandatory for the 47 jurisdictions with systemically important financial sectors and otherwise conducted upon request from member economies.
- The key findings of an FSAP are summarized in a Financial System Stability Assessment (FSSA).
- Note on Board summing up: At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors; an explanation of qualifiers used in summings up is provided at the IMF external link referenced in the source.
Source: IMF Executive Board Concludes 2024 Financial System Stability Assessment with the People’s Republic of China (Press Release No. 25/090, April 4, 2025).