Introduction: China's economic growth this year will be better than the overall global level, but there are still great uncertainties, and it is still necessary to prevent financial risks caused by internal and external factors. The transformation of China's economic growth model requires greater reform, opening up and innovation in the financial industry. The financial industry should adopt a variety of new tools and measures to strengthen its support to the real economy, especially small and micro enterprises, while the regulatory agencies should formulate new regulations in a timely manner to prevent and control new risks.
China’s economic growth this year will be better than the overall global level, which is certain.
In the fourth quarter of last year, China's GDP grew by 6.5%, which has returned to the trend growth level before the epidemic, and will continue this year. And because of the low base last year, the economic growth rate this year will be even higher in terms of numbers. The International Monetary Fund predicts that China's economic growth rate will reach 7.9% in 2021.
Image source: Oriental IC
// risk //
Over the past year or so, China has adopted a series of fiscal, financial, and monetary policies to stabilize the economy, stabilize enterprises, and ensure employment. The policy will continue to play a role this year.
For China, the next thing that needs to be paid attention to is financial risk.
From an external point of view, we need to pay close attention to when global monetary easing will turn around. Once the Fed starts to adjust its loose monetary policy, it may cause financial risks and market volatility, which requires psychological and policy preparation. From an internal point of view, whether the epidemic will bring "sequelae", potential risks such as an increase in market default rates and an increase in banks' non-performing assets, requires great attention.
Picture source: China Daily
The Central Economic Work Conference pointed out that the macro policy should maintain continuity, stability and sustainability. The main goal of macroeconomic policy is to ensure stable economic growth. Last year, China implemented a proactive fiscal policy and a prudent monetary policy, and introduced unprecedented support measures. If the economic growth rate continues to rebound as expected this year, the vigorous growth stabilization measures adopted last year will need to be slowly withdrawn.This is a very normal process, but this process will certainly not be a "sharp turn."
Especially considering that there is still a lot of uncertainty in the economic growth situation this year, the macro policy should be appropriately adjusted on the basis of maintaining the situation of last year. Last year’s monetary policy was relatively flexible, especially the adoption of some policy tools that directly reach the real economy. However, compared with other major central banks, the policy orientation is relatively stable, and this trend should be maintained this year.
Image source: China Daily
// support //
Last year, the financial system completed its goal of giving 1.5 trillion yuan in profits to the real economy. Relatively loose financial conditions, such as lower financing costs, should continue.
In the past 3 years, the financing cost of the real economy has continued to decline, and this year's financing cost has been steadily decreasing, which is also possible. In general, monetary policy will still maintain sufficient liquidity to support the growth of the real economy. Financial institutions and regulatory agencies work together to guide financing costs down as much as possible.
But what needs to be noticed is that last year's policy required the financial system to give away 1.5 trillion yuan to the real economy. This should be a temporary measure to deal with the impact of the epidemic, not a long-term strategy. After all, for financial institutions, market-based risk pricing is a basic condition for stable operation.
Picture source: China Daily
There are many methods that can be used to increase financial support to the real economy, including more direct financing methods and increased credit services. Market-oriented measures are more sustainable ways to reduce financing costs and support the real economy, including loosening monetary policy, enhancing competition, improving credit risk assessment, and government interest discounts.
// Pratt & Whitney //
Increasing the financial industry's service to small and micro enterprises, the difficulty lies in "difficulty in obtaining customers" and "difficulty in risk control." Small, medium and micro enterprises and low-income groups are large in number, small in scale, highly uncertain, and lack the qualification requirements to meet traditional credit risk assessment. right now,Traditional financial institutions generally use offline soft information methods to learn about enterprises and entrepreneurs in a long-term and comprehensive manner through bank loan officers, and then make credit decisions with very good results. However, the problem with this traditional model is that the "quantity" is not large, the cost is also high, and the inclusive effect cannot be formed.
The long tail effect of big technology platforms such as big data, artificial intelligence, cloud computing can help large-scale, low-cost, and high-speed customer acquisition, which solves the problem of reaching and acquiring customers. Using big data for credit risk assessment solves the problem of risk control and provides a feasible model for solving the problem of inclusive finance.
Image source: Oriental IC
However, this also creates new problems. On the one hand, from the perspective of the platform itself, it is necessary to consider how to ensure the robustness of its credit risk assessment model; on the other hand, it also affects supervision Institutions have put forward new requirements and need to introduce relevant data policies to protect consumers' rights and interests, effectively monitor their behavior and control financial risks.
// transformation //
Currently, the main challenge facing the financial industry is: economic growth needs to be transformed, and the financial system has not fully kept up with the pace of transformation.
China's financial system has effectively supported economic growth in the past few decades and created a miracle of China's economy. Under the past "factor input" economic growth model, the current financial system worked well; but now to switch to an "innovation-driven" economic growth model, further financial reforms, opening up and innovation are needed.
There are three main directions for financial reform: one is to increase the proportion of direct financing and to develop a multi-level capital market;
the other is to let the market mechanism play a decisive role in the allocation of financial resources;
the third is to reform the regulatory system and hold on The bottom line of a systemic financial crisis.
Picture source: Xinhua News Agency
China's financial industry has been opening up in the past two years. This has increased domestic competition and improved the level of financial services in the competition; The introduction of better financial products, financial processes and models from abroad,Better support domestic economic growth and technological innovation. At present, capital account convertibility and RMB internationalization may be key breakthrough areas for financial opening during the "14th Five-Year Plan" period. At present, the two-way floating degree of the RMB exchange rate has been greatly improved, and it may move towards managed free floating in the near future.
While opening up, we should also pay more attention to risks. The international economic situation is still unstable in the short term, and the monetary policies of major central banks may undergo major adjustments in the next few years. In this context, how to maintain financial stability while advancing financial opening requires great attention.
Picture source: China Daily
* The English version of this article is titled "Stability amid risks"
Editor | Buyingna
Editor |
