CSC Chairman Wang Guangyu Attends 2017 Zhongguancun Internet Finance Forum and Shares New Opportunities in Supply-Side Reform and Industry Finance
On December 23, "2017 Zhongguancun Internet Finance Forum and the Fourth Inclusive Finance Forum" was held in Beijing by the Zhongguancun Internet Financial Research Institute, the China Internet Finance 30 Forum (CIF30), and Guopei. The theme of this forum is "Digital Inclusivity & Green Finance", which drew more than 1,000 professionals from the government, financial institutions, enterprises and other sectors. Wang Guangyu, Chairman of the China Soft Capital Group delivered the keynote speech entitled "New Opportunities in Supply-Side Reform and Industry Finance ". He suggested that we do not need to be overly pessimistic about the real economy, but should take Internet-related emerging sectors more seriously, and understand the prevention of financial risks.
Speech summarized below:
The Central Economic Work Conference pointed out that 2017 is the year of deepening supply-side reform, and emphasized that structural imbalance is the primary source of conflicts and problems facing Chinese economy. We must work from the supply side at structural reforms, and strive for a new dynamic balance between supply and demand. Entrepreneurs and investors don't need to be overly pessimistic about the real economy, but rather focus more on emerging sectors, understand financial risks, and devise precise and refined plans in order to capture opportunities. Four points to share:
First, we should use “industry finance” as an accelerator to revitalize the real economy
Manufacturing and real economy are crucial to our nation. Supply side reforms and "industry finance" accelerator are significant to the real economy. To revive the real economy, entrepreneurs need to focus on improving the quality of services and products, strengthen brand building, stress technological innovation, actively acquire capital market knowledge, and grow enterprises with capital. We need to consider the opportunities and challenges with deepened collaborations between finance and industry, understand the financial needs for industry development, and provide efficient capital to the real economy.
Second, improve governance and supply so that finance can better serve the real economy
To achieve the balance between removing financial restraint and optimizing financial governance, the finance industry needs to innovate proactively as well as embrace regulations, and adopt scientific financial governance. Optimal financial governance requires financial infrastructure building. Increase information disclosure, improve credit system building, strengthen investor education; so that regulations are applied as intended and protect investors.
Increasing capital supply relies on a vibrant and wholesome financial institutional system. We need to continue to expand the entry of social and private capital, develop small and micro financial organizations and inclusive finance with multiple offerings; simultaneously regulate the development of third party payments, crowdfunding, P2P lending platforms and other internet finance models, to improve the transparency of private financing.
Third, speed up capital market reforms, build a compound capital supply system for SMEs
Indirect financing through bank systems is currently the main channel for capital supply in China, and is also the primary cause for “difficult and expensive financing” for SMEs. In order to solve this dilemma, we have to grow the direct financing market and develop a multi-layered equity financing market. In the future, bonds/stocks/PE/VC should be the entry points in which we can build the compound direct financing “supply” system.
Direct financing brings long-term and effective capital, improved governance, enhanced innovation and management for SMEs.
Fourth, prevent financial bubble, adopt self-discipline and regulations, and promote internet finance
When we see positive signals in the real economy, there are also signs of increasing financial risks. Internet-related financial innovations expose us to wider and more complex cross-market, cross-institutional and various business risks. The key to financial risk prevention is real economic profits and better business environment for private enterprises. When the real economy lacks investment opportunities, more capital inevitably flow into assets including real estate and financial markets, driving up asset prices.
Next, strengthen risk prevention in internet finance and other new financial businesses, and stress self-discipline and regulations. This year, specialized internet finance governance, regulations and policies have been implemented; industry self-discipline has strengthened; and fraudulent platforms have been gradually eradicated. On self-discipline, various platforms should clarify their own business development models and positioning, and fully utilize a comprehensive contingency approach with risk reserves, third party guaranties, “limited” security, diversified investments, insurance underwriting etc. Platforms should highly emphasize on credit, technology, operations, legal compliance and other risks, and improve risk management practices.
Last, the solution for China’s “tomorrow’s problem” is to deepen reforms and refine the market’s decisive role in allocating resources, breaking monopolies, and perfecting the factor market. In this respect, supply-side reforms represent the best opportunities for industry and finance integration and development, and need our innovation and dedication.