SVB collapse sounds alarm in China over financial risk amid push for tech innovation

The People’s Bank of China and State Administration of Foreign Exchange have vowed to improve financial market security following the Silicon Valley Bank collapse

China’s central bank has also vowed to respond to US and Western containment, following a meeting to study President Xi Jinping’s speeches during the ‘two sessions’

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The collapse of Silicon Valley Bank provides a valuable lesson that oversight must be improved in China, analysts say. Photo: EPA-EFE

Published: 10:15pm, 15 Mar 2023Updated: 9:26am, 16 Mar 2023

The sudden collapse of Silicon Valley Bank has sounded an alarm in China, prompting policymakers to stress the fine balance that must be maintained between de-risking and state funding for technological innovation.

China’s preoccupation with the issues has already led to a regulatory shake-up at the recently concluded “two sessions”, with a new national financial oversight administration proposed and the Ministry of Science and Technology given bigger responsibilities in handling US technological decoupling and containment.

Few Chinese analysts expect an immediate threat to the country’s financial system from the collapse, but many say the failure of the technology-focused American bank provides a valuable lesson that oversight must be improved, especially when huge sums are being poured into tech innovation in the name of a new whole-nation mechanism.

“It won’t generate a substantial impact on China’s financial markets. However, the domestic financial industry needs to learn the lesson and always put risk control as the No 1 priority,” said an editorial in the Securities Times, a newspaper under the Communist Party mouthpiece, the People’s Daily.

We must design a business model that can cover the potential loss in supporting scientific and technological innovation

Liu Xiaochun

Liu Xiaochun, deputy director of the Shanghai Finance Institute and a former president of the Hangzhou-based Zheshang Bank, said it was inappropriate to set up a similar specialist bank in China.