The Challenges and Opportunities in the Development of the Capital Market in China
On May 9, the Finance EMBA Lecture moderated by Professor Xiao Geng, Director of the Institute of Policy and Practice, Shenzhen Finance Institute (SFI) and Chairman of the Hong Kong Institution for International Finance, came to a successful conclusion. Professor Shen Liantao, Member of the International Committee of the National Financial Regulatory Administration, Member of the Chief Executive’s Council of Advisers of the Government of the Hong Kong Special Administrative Region, Member of the International Advisory Council of the China Development Bank, and Distinguished Professor of SFI, gave a keynote speech to the teachers and students of Finance EMBA.
01 The nature of money
We need to reflect on the evolution of the real economy and complex capital markets from the nature of money. It is precisely its strong financial derivatives that enabled the United States to create a variety of financial products, in which regard, it outperformed China in the current bank-dominated financial stage. We need to further promote the internationalization of the RMB and enhance its influence and status in the global financial system. This requires reducing transaction costs, strengthening liquidity, and improving returns. This means establishing a multi-level capital market, resilient financial infrastructure, and long-term investment institutions. Simply put, a sound ecosystem for high-risk financing and high-tech R&D needs to be established.
02 Pursuit of common interests: realizing sound competition and cooperation among major countries
The widely co-opted view that “information is a measure of money and value” in society reflects an important feature of the information era: In the context of the rapid development of digitalization, information and knowledge have become an important force in promoting social progress and development. Therefore, mastering information and analytical skills is essential for individuals, society, and the country to make wise investment decisions.
In today’s increasingly fierce competition in science and technology, capital operation and talent attraction are crucial. China needs to further improve its capital market and talent policies to support the sustainable development of the science and technology industry and maintain its global competitiveness. The United States has successfully guided funds to the fintech model of Silicon Valley through fiscal means such as tax incentives, which has innovatively exerted a profound impact on the global economy. Shenzhen is also trying to follow suit. As China’s science and technology center, Shenzhen has attracted a large number of talents and developed a cluster for entrepreneurship by vigorously promoting the science and technology industry. But the core of the new era lies in the application of digital currency. As a monetary means in the new era, digital currency can be not only issued by the central bank but also used by private enterprises. However, the industry still calls for a sound regulatory system.
03 Top-level design: providing guarantee for sustainable social development
The bigger problem China is facing now is insufficient pensions. As the aging population grows, many people use real estate as a source of pensions. However, once the United States raises interest rates, currency and asset liquidity will be affected and challenge China’s pension system. In contrast, the United States chose to maintain its pension system through financial products. China needs to find new ways to address this problem. Chinese enterprises can create new wealth through scientific and technological innovation, which can be used as an investment in the next generation of high-tech industries. In this way, China can maintain its momentum of economic growth, which will help solve the pension problem.
Back to the globe, countries along the Belt and Road need a lot of resources and trade stability to realize a more inclusive and sustainable development model. However, the United States has taken a series of measures to contain China in an attempt to satisfy its own consumption needs by absorbing China’s savings. In response to the challenge, Chinese banks, as the world’s largest savers and lenders, have the ability to promote the common prosperity of the countries along the Belt and Road. However, to achieve this goal, China must establish a sound financial system with sufficient competitiveness and resilience.
