Chinese Financial Regulatory Reform (2023)

The 2023 Institutional Reforms

In March 2023, the National People’s Congress approved the most significant restructuring of China’s financial regulatory architecture since 2003. The reforms, implemented through the Plan for Deepening Reform of Party and State Institutions, consolidated banking and insurance supervision under the newly created National Financial Regulatory Administration (NFRA), abolished the China Banking and Insurance Regulatory Commission (CBIRC), and adjusted the People’s Bank of China’s (PBoC) supervisory functions.

The reforms addressed longstanding criticisms of China’s fragmented financial regulatory system. Prior to 2023, banking and insurance supervision was conducted by CBIRC, securities regulation by the China Securities Regulatory Commission (CSRC), and systemic risk oversight by the PBoC. The new structure creates a more centralised model, consolidating most financial regulatory functions under NFRA while reinforcing the PBoC’s focus on monetary policy and macroprudential stability and the CSRC’s focus on securities market regulation.

National Financial Regulatory Administration (NFRA)

The National Financial Regulatory Administration (Guojia Jinrong Jiandu Guanliju), established in May 2023, assumed all of CBIRC’s functions as well as certain supervisory functions previously held by the PBoC. NFRA is a ministry-level agency directly under the State Council, with its head holding minister-level rank.

NFRA’s mandate covers the supervision of all financial institutions except securities companies and futures firms (which remain under CSRC jurisdiction). This includes commercial banks, rural credit cooperatives, insurance companies, financial holding companies, trust companies, consumer finance companies, auto finance companies, and other non-bank financial institutions. NFRA also exercises regulatory authority over financial holding companies (jinrong konggu gongsi), a function transferred from the PBoC.

The establishment of NFRA is intended to eliminate regulatory gaps and overlaps. Under the previous structure, the PBoC and CBIRC shared supervisory responsibility for payment institutions, financial holding companies, and systemically important financial institutions, creating jurisdictional ambiguity. NFRA’s unified authority over the banking and insurance sectors is designed to reduce regulatory arbitrage and to enable comprehensive risk assessment of financial conglomerates.

PBoC Macroprudential Functions

The 2023 reforms re-focused the People’s Bank of China on its core monetary policy and macroprudential functions. The PBoC transferred its financial institution supervision functions — including supervision of financial holding companies and payment institutions — to NFRA. The PBoC retains authority over monetary policy implementation, foreign exchange regulation, macroprudential assessment, financial stability and risk monitoring, and payment system oversight.

The PBoC’s Macroprudential Assessment (MPA) framework, developed from 2015, continues as the central mechanism for systemic risk monitoring. The MPA evaluates financial institutions across seven dimensions: capital adequacy, asset quality, liquidity, cross-border financing, risk governance, pricing behaviour, and credit policy implementation. The 2023 reforms enhanced the PBoC’s authority to require financial institutions to hold counter-cyclical capital buffers and to impose sectoral macroprudential measures.

The PBoC also retains the Financial Stability and Development Committee (Jinrong Wending Fazhan Weiyuanhui) secretariat, the principal inter-agency coordination mechanism for financial regulation. The Committee, chaired by a Vice-Premier, coordinates among NFRA, CSRC, PBoC, and the Ministry of Finance on systemic risk issues.

CSRC Securities Regulation

The China Securities Regulatory Commission (CSRC) retained its regulatory authority over securities and futures markets under the 2023 reforms. The CSRC was upgraded from a vice-ministerial to a ministry-level agency, elevating its institutional status to equal NFRA and the PBoC.

The CSRC’s jurisdiction covers securities issuers, securities exchanges, securities companies, fund management companies, futures companies, and securities investment advisers. The Commission exercises authority over public offerings (under the registration system introduced in 2020), securities trading, market manipulation, insider dealing, and securities investment fund regulation.

The 2023 reforms transferred to the CSRC the supervision of corporate bond issuance, which had previously been divided between the CSRC (corporate bonds) and the National Development and Reform Commission (enterprise bonds). This consolidation ended the dual supervision of debt securities markets and is expected to improve regulatory coherence.

Financial Holding Companies Regulation

The Regulation on Financial Holding Companies (Jinrong Konggu Gongsi Guanli Banfa), adopted in September 2020 and effective November 2020, established the legal framework for regulating financial conglomerates. The Regulation requires any entity that controls two or more financial institutions and meets certain size thresholds to establish a financial holding company and to obtain approval from the PBoC (now NFRA following the 2023 reforms).

The Regulation was prompted by the growth of complex financial conglomerates — including the Ant Group and Tencent groups — whose structure created systemic risk through cross-subsidisation, connected transactions, and regulatory gaps. The Regulation imposes capital adequacy requirements, limits connected transactions, requires transparent governance structures, and prohibits vertical management structures that circumvent regulatory oversight.

The Regulation has been applied to several major financial conglomerates. Ant Group, the fintech affiliate of Alibaba, underwent a court-ordered restructuring in 2021 that required it to establish a financial holding company subject to NFRA supervision. China Merchants Group and CITIC Group were among the first financial holding companies to receive approval under the Regulation.

Fintech Oversight

Fintech oversight has been a major focus of regulatory reform. The 2023 reforms assigned NFRA primary responsibility for the supervision of fintech activities conducted by financial institutions, including digital banking, online insurance, and payment services. The PBoC retains authority over payment system regulation and digital currency (the digital yuan, or e-CNY).

The Fintech Innovation Supervision Pilot (Jinrong Keji Chuangxin Jianguan Shidian), launched in 2019 by the PBoC, established a regulatory sandbox framework for fintech products. The Pilot, since expanded to multiple cities, allows fintech companies to test products in a controlled environment with reduced regulatory requirements. The 2023 reforms confirmed the sandbox framework and assigned NFRA responsibility for supervising products that graduate from the sandbox to full market operation.

Conclusion

The 2023 financial regulatory reform represents the most significant restructuring of China’s financial supervision architecture since the establishment of China Banking Regulatory Commission in 2003. The creation of NFRA, the reorganisation of PBoC functions, and the elevation of CSRC consolidate financial supervision while clarifying institutional responsibilities. The reforms respond to the lessons of China’s 2015-2016 stock market turbulence, the 2020-2021 fintech regulation campaign, and the persistent challenge of supervising complex financial conglomerates. The new architecture’s effectiveness will depend on inter-agency coordination, the development of specialised supervisory capacity within NFRA, and the management of the increasingly blurred boundaries between banking, securities, and fintech activities.