Research On The Challenges And Solutions Of China’s Financial Supervision Under Financial Innovation

Since 1980 s, with the development of financial market, the speed of finance globalization and liberation is fabulous. Financial rivals not only came from domestic, but only came from worldwide. In order to enhance their international competiveness of financial industries, many countries push financial deregulation and create relaxed circumstances for financial innovations. In the middle of 1980 s, financial innovation is more fabulous than other time. On the one hand, financial innovations expand the space of financial development. On the other hand, financial innovations increase the risk of financial market. The traditional financial supervision is not enough for financial innovations. After the outbreak of the sub-prime mortgage crisis in 2008, many countries adjust the structure of financial supervision to recover from the financial crisis. Even though China suffered low degree of influence in the sub-prime mortgage crisis, we can not overlook the problem in our financial supervision.Financial innovation in China is still belongs to new things. After 1978 reform and opening up, financial innovation appeared in China. Financial innovation originated in western countries, and it has developed quickly in western countries. Western countries have more profound researches and practices for financial innovation and financial regulatory reform. So learn from western countries is helpful for China. Now there are four kinds of financial supervision modes, namely: institutional supervision, functional supervision, Shuangfeng supervision and comprehensive supervision, while China uses the institutional supervision mode currently. Before the outbreak of the sub-prime mortgage crisis in 2008, the USA uses functional supervision, and the UK uses comprehensive supervision, and Australia uses Shuangfeng supervision. Australia escaped from the hit of crisis because of its financial supervision mode.In my paper, I put some suggestions for China’s financial supervision through the analysis of financial regulatory reform in the western countries. Through the analysis, shuangfeng supervision is more suitable for the development of financial innovation. In view of China’s current situation, we can not transfer institutional supervision mode to Shuangfeng supervision mode quickly. So I put forward the short-term suggestions and the long-term suggestions. In short-term,(1) our country should set up Macro-prudential mode dominated by People ’s Bank of China. People ’s Bank of China act as the role to coordinate the communication and contact between other financial regulators. Then People ’s Bank of China can get enough information of financial institutions.(2) Our country should accelerate the construction of financial information system.(3) Our country should strengthen the cooperation between domestic financial regulators and foreign financial regulators, they learn from each other and resist international financial risks together.(4) We should perfect the legal system of financial supervision.(5) We should establish and improve the incentive and restraint mechanisms. In the long-term, our country should set up the national financial administration, prudential regulation authority and conduct authority. We also remain CBRC, CSRC, CIRC, but they will not regulate the certain financial institutions but to regulate the certain finance service. The national financial administration is dedicated toward coordinating.