Today, China's banking sector has total assets of more than 100 trillion yuan ($15.82 trillion) and many Chinese banks have gone international. The banking industry has a low rate of non-performing loans and high risk resistance capacity, and rapid progress has been made in building firewalls and adopting international practices. However, the banking sector still lacks innovation and competitiveness.

But the biggest challenge comes from the risk of loans granted by various local government financing vehicles and those for real estate. With huge local government debt and strict real estate regulating policies, the whole banking sector still faces high risks. How to realize a stable transition, control the total amount of loans and reduce risk are the difficulties Shang needs to address.

Guo Tianyong, Director of the Center for Chinese Banking Studies of Central University of Finance and Economics, said during the eight years Liu acted as CBRC Chairman, he combined international banking regulatory practices with Chinese conditions and formed a new banking regulatory mechanism, which has played a significant role in maintaining stable operations of the banking sector and preventing risk. Therefore what Shang needs to do first is to further enhance the mechanism.

According to analysis of industry insiders, Shang will not formulate too many measures soon to deal with the problems the banking sector faces. As is Shang's style, the top priority will be maintaining stability and controlling risk. He will make his move only after carefully solving the problems of his predecessor.

Xiang may face the biggest difficulties among the three new chairmen. Since this year, the Chinese life insurance industry has faced unprecedented problems: The growth of premiums across the industry has slowed and the premiums for new policies even decreased. Moreover, the industry also faces a long-standing integrity crisis, as well as many other difficulties, like relaxing insurance funds and improving earning capacity while offering more services to an aging society.

Since he has no experience in the insurance industry, the road before Xiang is obviously more complicated. However, the industry has high hopes for the new chairman. During his term as board chairman of the Agricultural Bank of China, he succeeded in passing the proposal of acquiring shares of Jiahe Life Insurance Co. Ltd. in February 2011, promoting mixed operation of banking and insurance businesses. Industry insiders expect he can create more opportunities to the strategic cooperation between banks and insurance companies.

Xiang also attaches great importance to services offered by banks to support agriculture and farmers. Whether he can promote further development of insurance products for agriculture, the countryside and farmers is also a concern of industrial insiders.

Market expectations

According to Hu, reshuffling the three regulatory authorities sets the bar high in terms of people's expectations for China's financial system.

Hu said after years of development, core businesses of China's financial industry—banking, securities and insurance—have all begun market-oriented operations and their scales are expanding. Particularly the joint stock reform and public offering of state-owned commercial banks, split share structure reform of listed companies and promulgation and amendment of the Insurance Law have completely changed the development track of the three industries. The financial sector has entered a period of stable and sound development.

In the next five years, China's financial sector will improve as industrial changes deepen. These deepened reforms will bring new challenges to financial regulation, which needs new ideas and new measures to make the financial system more stable and competitive.

According to a report by the China Securities Journal, in the banking, securities and insurance industries, people are now eagerly awaiting new measures and innovations for market-oriented reform.

In the securities industry, people expect bigger developments of the bond market with systematic innovation, larger financing scale and links of the inter-bank market and exchanges.

In the banking industry, people expect a credit and financing mechanism serving micro and small enterprises to be established. They're also looking for improvements to counter-cyclical regulation of the banking sector and flexible adjustment of the reserve requirement ratio and provision rate.

Expectations for the insurance industry hold out for further expansion for investment tools, scope and scale of insurance capital, regulation of the market and addressing various problems in insurance sales and agencies, and to prevent and resolve risks, and strengthen supervision over capital and corporate governance.

The three new chairmen face various challenges, such as maintaining stability of the financial system, the yuan's appreciation, local government debt and IPO reform