April 17th news from the financial worldFrom April 15th to April 17th, the 2022 Tsinghua PBCSF Global Financial Forum will be held. The theme of this forum is “Stability and long-term development, finance helps high-quality development”, focusing on three aspects of China and the world, market and regulation, academic and practice, discussing major issues in the economic and financial fields, and contributing to China’s financial opening and the global economy. Development suggestions.
Wu Xiaoqiu, former vice president of Renmin University of China and dean of China Capital Market Research Institute, attended the forum and delivered a speech entitled “Creating Liquidity: From Currency to Assets – The Evolution of Financial Functions”.
Economic growth is inseparable from an appropriate institutional platform, and a market economy is most suitable for sustainable economic development. The basic elements of a market economy include division of labor, competition, transactions, free markets, equality of subjects, incentive mechanisms, and the role of capital. Wu Xiaoqiu said that in order to sustain economic growth, these elements must be respected and incorporated into them.
With the advancement of technology and changes in the form of economic development, technological progress and technological innovation have become very important driving forces for economic development. For technology to become productive forces and drive economic growth, there is great uncertainty. How to properly allocate this uncertainty is a problem faced by finance. Wu Xiaoqiu proposed that in order to deal with different risks and the balance of its uncertainties, finance must undergo changes.
Finance has six functions, including resource allocation, payment and settlement, wealth management (or risk management), incentive mechanism, provision of price information, and equity division. Wu Xiaoqiu believes that its core function is how finance creates liquidity.
In different eras, the focus of finance to create liquidity is different. In a capital-underdeveloped society, the main function of finance is to create monetary liquidity. Wu Xiaoqiu believes that although monetary liquidity is the blood of economic development, as people’s income levels increase, they find that another function is needed, that is, they must enjoy the wealth effect of economic growth. Then we must securitize the wealth of this new economic growth. In layman’s terms, we must standardize the division of the original indivisible assets. This is the sixth major function of the so-called finance. segmentation. The core of asset and share division is to create liquidity of assets, that is, to create potential and predictable assets as an asset form in advance, which is called securitization.
Society needs assets that can grow, that is to say, the asset formats behind it must be technological and innovative. Wu Xiaoqiu said that if the above problems are clearly understood, the logic of China’s development of the capital market can be found. The logic of capital market development is to find the intersection of modern finance and high technology. Wu Xiaoqiu believes that a long-term strategy without capital will not go far. If a country’s listed companies have few innovations that are breakthrough innovations, and their innovations serve market value and profits, then the country’s capital market will be very short-term, and the country does not have strong technology strength. The strategic vision should be highlighted in the capital. Wu Xiaoqiu said that China must create a group of capital with a strategic vision to invest in fields such as chips and life sciences that have a strong supporting role for human society and China’s future development. This is what we are currently lacking. But this point cannot be emphasized alone. Some projects may have long-term benefits and others have short-term benefits, and a balance must be found between the two.
The original intention of the capital market is to put high-tech companies in the front. Wu Xiaoqiu believes that it is necessary to change the structure of Chinese listed companies and highlight the scientific and technological power of listed companies. Among China’s listed companies, traditional industries have long occupied the top ten, which is contrary to the original intention of the capital market, which is to put high-tech companies in the front. China’s development in this area is not enough, so there will be a registration system reform. The registration system reform is trying to find a force and a system to allow technology-based companies to occupy the leading force in China’s listed companies. It also found the integration point of modern finance, capital market and technology, and found the correct development direction of the capital market. .
At the end of the speech, Wu Xiaoqiu concluded: “Finance creates liquidity, but traditional finance creates the liquidity of money, and modern finance creates the liquidity of assets. If you understand this problem thoroughly, the reform of China’s capital market and China’s finance will be very difficult. find the right direction.”