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China appointed Guo Shuqing as the nation’s top regulator overseeing its $43 trillion banking and insurance industries, said a person familiar with the matter, filling a key role in President Xi Jinping’s campaign to curb risks in the financial sector.

Guo, who has helmed the China Banking Regulatory Commission for about a year, becomes chairman of the new China Banking and Insurance Regulatory Commission, said the person, who asked not to be identified as the decision isn’t yet public. The Economic Observer reported the nomination earlier.

(Related: China’s Insurance Regulator May Get a Hostile Takeover)

China last week announced the merger of its banking and insurance watchdogs in the biggest industry overhaul since 2003. The change also consolidated the power of the Communist Party and will probably extend Xi’s policy of reducing debt, which stands at about 266% of output.

Global hedge fund managers such as Kyle Bass have been scathing in their assessment of financial danger in the world’s second-largest economy, pointing to an ever-growing pile of debt and ballooning assets in recent years in the shadow-banking industry. China is among economies most at risk of a banking crisis, the Bank for International Settlements said in a study published this month, citing early-warning indicators including household borrowing.

Showing Teeth

Guo, 61, a fluent English speaker, will continue his mandate of controlling financial risk, which culminated last month in the unprecedented government takeover of Anbang Insurance Group Co. The CBRC under Guo has also shown its teeth by slapping a record amount of fines on financial institutions for such offences as concealing the true extent of their bad loans.

The banking regulator, created in 2003, supervises over 4,000 banks with $40 trillion in assets, while the insurance regulator, established in 1998, oversees 17 trillion yuan ($2.7 trillion) of insurance assets.

Still, challenges facing the regulator include:

  • Wealth management products remain the biggest and probably most dangerous corner of the country’s shadow banking industry with $4.7 trillion of outstanding value, or 36% of China’s GDP .
  • Household debt surged by 21% in 2017 to 40.5 trillion yuan.
  • China banks were under-capitalized in any sudden economic downturn following a credit boom.
  • IMF warned Malpractice and irregularities continue at financial institutions even as more than 2.9 billion yuan of penalties and confiscations of funds were imposed in 2017, a 10-fold surge from the previous year.

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