Under the new normal, different from the rapid development in the past, real economy development will stress both quality development and speed. At the beginning of a new era, we must have a comprehensive understanding of the changes in the coming decades. As a binder, finance will promote military and civilian integrated development.

Think outside of the box for technology finance

Based on traditional finance, it is difficult to integrate the modern financial system. I am not saying that finance should support science and technology, but finance should be transformed by science and technology in large scale, so that it can comprehensively and thoroughly serve the real economy. Only on this basis, can we solve some problems of traditional finance such as cost, efficiency, and lack of inclusiveness. Furthermore, the problem of business sustainability also needs to be solved by transforming finance through technology.

The earliest intervention of science and technology finance in our country is payment and settlement. Internet-based settlement is featured with low cost, high efficiency, very extensive information, and collects a lot of information that could not be obtained in the past. Coupled with the existing algorithms, such information can be used effectively to judge the credit of traders and guide the flow of funds. After successfully entering the payment and settlement, it began to expand to other areas.

Actually, with payment and settlement, it does not matter if the currency is issued or not. However, many people are engaged in finance using technological tools with old thinking patterns. China is the leader in this field. I hope that we stay true to the mission. We should not make money according to the traditional methods, but should make the financial industry stronger with the help of advanced technologies that have been developed in China, so as to achieve the ambitious goal of 2050.

“De-leveraging” cannot demonize leverage

The Chinese economy, after decades of rapid development, has both good and bad things. China’s financial system can only move forward by clearing some potential risks in the financial system, so that it can effectively serve economic development and the construction of a modern economic system.

The source of financial risk is high leverage, so all our work is centering on de-leveraging. We must make this point clear. In fact, finance is an industry operating on leverage. All economic activities must make effective use of leverage to a certain extent, thus we cannot demonize leverage.

Borrowing someone else’s money is costly. Whether the output created by the economic activity with money borrowed from others can cover the cost or not is the question. If it cannot cover the cost, it will bring about risks. This risk will become a systemic risk as it scales up through the financial system.

In terms of financial regulation, what we need is good regulation instead of strong regulations. The so-called good regulation means that government should only give directions for all financial activities, financial enterprises, and individuals engaged in financial activities, instead of supervising everything. This is the point to be paid attention to in modern finance.

(The author is a member of the Academic Committee of Shanghai Academy, and former Vice President of CASS)