Key change: To set up a new committee to strengthen regulatory coordination
China held its fifth National Financial Working Conference on 14-15 July. This conference emphasized the financial sector supporting the real economy, strengthening regulatory oversight and preventing systemic financial risks. The most important change was to set up a new, higher-level committee to strengthen regulatory coordination. This should help reduce regulatory arbitrage and hence lower systemic risks over the long run. In the near term the government implied it would maintain a tight liquidity balance, i.e. it is unlikely to further tighten or loosen. We view big banks as key beneficiaries of a more properly regulated environment. Buy ICBC/BOC/CCB.