At the 2026 Lujiazui Forum, which opened today in Shanghai, the heads of China's major financial regulatory bodies delivered speeches. The new head of the National Financial Regulatory Administration made her first public appearance and address at the event.

She emphasized that the current landscape of financial supply and demand has shifted. Promoting the consolidation and quality enhancement of small and medium-sized financial institutions is a crucial measure to curb disorderly competition in the financial sector and to shift the focus from pursuing speed and scale to prioritizing quality and efficiency.

The official stated that financial institutions must proactively adapt to these changes in the supply-demand dynamic. The overarching direction for the industry is clear: supply now exceeds demand, necessitating a move toward "reducing quantity and improving quality."

This stance aligns with previous calls to deeply address disorderly competition within finance and to transition from a growth-and-scale model to one centered on quality and profitability. The concept of "advancing the reduction in quantity and improvement in quality for small and medium financial institutions" was first introduced at last December's Central Economic Work Conference.

This initiative represents a further step in the "clean-up and restructuring" of these institutions following earlier risk mitigation efforts. It is also a deepening of the structural reforms on the financial supply side. These reforms, first officially proposed in 2019, elevate finance to a level of national strategic importance.

While earlier efforts focused on resolving risks at troubled small and medium institutions, the current phase aims to drive a fundamental shift in their operational paradigm. This consolidation and quality upgrade is a vital component of the broader financial supply-side reform.

Compared to past supply-side reforms in traditional "old economy" sectors like steel and coal, the restructuring within the financial system presents a significantly more complex challenge. The task ahead for the new regulatory chief and for industry practitioners is substantial, heralding a period of major transformation.