What should China's financial system look like?

The most important digitization of finance is the digitization of credit, followed by the digitization of payments and wealth management, and finally the digitization of money.

"What kind of financial system do we need?" Wu Xiaoqiu, an economist and president of the China Academy of Capital Markets, asked at the 2020 (19th) Annual Meeting of China's Business Leaders, organized by China Entrepreneur magazine, a topic he has been studying recently.

Wu said everyone knows we don't want P2P-style finance, but to be clear about what kind of financial system we need, we have to make a good grasp and analysis of our future goals and the foundation of China's reality.

"We make the digitization of money or digital currency very hot today, sometimes it is important, but it is not the most important. The most important digitization of finance is the digitization of credit, followed by the digitization of payment and wealth management, and finally the digitization of money." Wu spoke as he shared one of the directions of change in the financial system.

The following is an abridged transcript of Wu's speech:

The title of my speech is "What kind of financial system does China need". This is a topic that came to me out of a sense of humor, and also in response to some of the current debate. First of all, we need to look at the foundation of our reality and where we are going in the future. What are our goals?

Economic development cannot be separated from finance. China's reform and opening up over the past 40 years, we have gone from a poor and backward country to a fully well-off society, from a per capita GDP of more than a hundred U.S. dollars to more than 10,000 U.S. dollars, of course, there are a number of aspects of the role of the role of one of the role can not be ignored is the role of finance.

Clear five questions

The key to the question is what kind of finance we need, P2P-style finance we do not need, so we must put our future goals and the basis of China's reality, to do a good grasp and analysis.

First, we will fully realize the goal of a moderately affluent society by 2020, which means that from now on, a moderately affluent society in all respects is our starting point, and in accordance with the "Fourteenth Five-Year Plan" established by the Fifth Plenary Session of the Nineteenth Central Committee, as well as the visionary goal of 2035, China will be built into a medium-developed country by 2035. developed country by 2035.

From a moderately affluent society to a middle-developed country is an ambitious goal. Comrade Deng Xiaoping said at the beginning of the reform and opening-up process that "we should become a middle-developed country by the middle of the next century, that is, around the year 2050", and we are advancing the goal of becoming a middle-developed country by 2035, which is a very important goal. This is a very important goal.

Secondly, starting from the 14th Five-Year Plan, the strategic layout of China's economic development will undergo a major change. Just now, President Gao Peiyong scientifically and accurately explained the essence and purpose of the double-cycle pattern, which means that during this period, China's economic development strategy will undergo a major change.

In this, just now Prof. Gao Peiyong said, don't just see the double cycle, the core is the internal cycle is mainly, which requires us to greatly improve our income level, to expand our domestic demand, which obviously need financial intervention. At the same time this inner cycle of development is still characterized by innovation-led, technology-driven, high-quality development.

Third, the development of China's economy must be the strategic transformation of industry, industrial transformation, science and technology will become very important to promote, we have to say goodbye to those in the past, over-reliance on natural resources, over-reliance on the so-called demographic dividend of the economic development model, we must take the road of scientific and technological innovation.

Fourth, the future of the entire economic operation of the platform development changes, in which digitalization, intelligence is a basic feature.

Fifth, the external environment for China's economic development has also undergone major changes, becoming complex and severe, and the new coronary pneumonia epidemic will lead to major changes in the entire policy framework, the global economic order and rules.

The financial system we need

When we have to sort out these basics, of course we know what kind of financial system we need.

First, the main part of China's financial system is, of course, the commercial banks, which dominate roughly 70 percent of China's financial resources, and the market capitalization of our capital market is now $80 trillion, the balance of the bond market is $110 trillion, and the total assets of China's banking sector in both Chinese and foreign currencies is $290 trillion, and that's roughly the total number.

Of course, if you add the bond market, because the capital market theoretically also includes the bond market, it's close to being $200 trillion, and the total assets of China's banking sector is over $300 trillion, plus other types of insurance, you can see that the banking sector still dominates.

So what kind of banking system do we need in the future? The focus of China's banking reform is on digital transformation, and if we don't do it, China's traditional banks will be eliminated, so digital transformation as well as improving its inclusiveness is an important task for China's banking system in the future, that's one.

Secondly, the future of China's capital market is focused on marketization, marketization is the most important thing is to improve the structure of listed companies, to make China's capital market has a good wealth management sector, the future of China's financial function is not only limited to the financing function, and slowly turn to the wealth management and risk allocation, so what kind of financial sector has the ability to wealth management and risk allocation? Capital markets.

So, in the future, vigorously develop the capital market, improve the wealth management function of the capital market has become particularly important, is the next step in the focus of financial reform and development. In this sense to understand the registration system can be understood clearly, because it is to give this market a very good wealth management function.

Third, to expand our wealth management platform, wealth management organizations, we now have a per capita GDP of more than 10,000 U.S. dollars, by 2035, what is the concept of a medium developed country? It is generally considered to be more than 20,000 U.S. dollars, about 25,000 U.S. dollars, and now the world has become a developed country 31 countries, the lowest is more than 20,000 U.S. dollars, which will rapidly increase the demand for wealth management, which not only puts forward the requirements of the capital market, but also puts forward the requirements of the wealth management institutions.

The current public fund is a platform for wealth management, but its credit is relatively poor, and there were too many "mouse positions" in the past, of course, it is improving today, but the shadow of the people is still very big, so we must create a transparent, standardized, and can be trusted by the wealth management platform.

Fourth, we must vigorously promote the revolution of the payment industry, finance, in addition to lending, wealth management, risk allocation, payment and clearing has become very important, so the third-party payment based on digitization is still the focus of the future we want to focus on the development and improvement of the focus.

Fifth, the development of science and technology based on big data, cloud computing and financial behavior of finance, which is very important, that is to say, now don't look at P2P as science and technology finance, it is an alternative to science and technology finance, the failure of the P2P is logical, is inevitable, but it does not mean that the combination of finance and science and technology of the failure of the combination of the two is still a key point of the future of China's financial development.

Sixth, digitalized finance. The first focus of the digitalization of finance lies in the digitization of credit, the digitization of credit is the basis of financial change, is the arrival of the new financial era, the basis of digitization lies in the construction of a credit data platform. The second element of digital finance is the digitization of payment, the third is the digitization of wealth management or the digitization of wealth business, and the last is the digitization of money.

We make the digitization of money or digital currency very hot today, sometimes it is important, but it is not the most important, the most important thing for the digitization of finance is the digitization of credit, which is what kind of finance we need in the future, this is the sixth aspect.

Seventh, to track financial change, adapt to the changing times, and promote financial development of innovative regulatory system. Because the future of the financial industry will be diverse, regulatory guidelines, standards, methods should also be diverse, we can not use a regulatory guidelines and methods to regulate diverse financial industry, so China's financial regulation to speed up the pace of innovation, we can not use a standard, because the future of the financial is very diverse, it is based on this view, if our future of China's financial can be achieved in these seven points.

Eighth, the last one is China's financial opening up to the outside world.

These eight points, this is the future of China needs modern finance.