First of all, we should see its foundation, that is, during the Asian financial turmoil, Chinas rural finance faced great difficulties. At that time, rural foundations collapsed on a large scale. In such a case, how to design, promote and implement. This reform emphasizes the health of rural credit cooperatives and the symbiosis between them. They are mutually reinforcing, not a zero-sum game.
Secondly, it emphasizes that at every stage of reform, we should strive to establish the best incentive mechanism to enable us to move forward. After the Asian financial turmoil, in a period of time, under the condition of the gradual weakening of the three rural financing, through this reform, the strength of supporting agriculture was called at that time. Some support farmers to work in cities, run small and medium-sized enterprises and small and micro-enterprises. In this regard, achievements have been made, and many indicators have been improved.
(2) During the global financial crisis, when promoting inclusive finance, the State Council, the Peoples Bank of China, the Banking Regulatory Commission and other regulatory departments jointly launched an indicator system.
Of course, the indicator system is also an indicator system that the World Bank and other international organizations are keen to promote. In my opinion, this indicator system should be of great use. The vast majority of small and micro-finance, Inclusive Finance is often not broad enough vision. First of all, you should know how other countries are doing. This indicator system is multidimensional, including the opening of accounts, deposits, convenience of payment, insurance, agricultural futures, loans and so on.
Therefore, it helps you to compare where you have weaknesses and where you have room for improvement. As such a large country, every province can also find its own weaknesses through the measurement of the index system, and know what areas are inferior to others, so there is more room for improvement. Therefore, I think that this work should have some experience for your reference.
Judging from the current situation, we still have some deficiencies in the number of indicators system, because it always has the problem of caliber, and the caliber of these indicators system statistics is not entirely consistent, so it does not attract peoples attention to a higher degree. In my opinion, there is still further potential to be tapped in this regard.
(3) Inclusive finance has been included in the G20 as a special topic.
In China, when President Xi chaired the G20 in 2016, the topic of Inclusive Finance was raised to a very high level. At the same time, Inclusive Finance and green finance were combined to a certain extent. China also participated in various international working groups to provide materials for the meeting. In my opinion, this matter is also of great significance; it also makes people realize that green development actually has inclusive content, and that non-green tends to endanger the inclusive benefit in the end.
Secondly, just now you have also mentioned the impact of digital economy, digital and Internet on inclusive finance.
In my opinion, the impact is quite tremendous. We have experienced such shocks. The impact is inclusive finance. In the past, we have relied more on digital technology and electronic networks from emphasizing grass-roots networks, taking root at the grass-roots level, serving the grass-roots level, having networks at the grass-roots level or small financial institutions. This change should be said to have been obvious, and everyone will attach great importance to it. At the same time, the transition is uncertain.
One of the uncertainties, from what I just said, is that if we rely more on digital technology and network technology, it is likely that many small inclusive financial institutions will rely more on public credit reporting systems. Assuming that the public credit information system can provide satisfactory and abundant information, there is a problem. What is the need for those small and medium-sized financial institutions? So there are also some contradictions. There may also be a mixed situation, on the one hand, we still need to take root in the grass-roots network and financial institutions; at the same time, there may be a considerable number of inclusive financial services, whether from credit, insurance or payment, in the future more into online, online operations, and whether the company takes root in the grass-roots seems less relevant. What is the final relationship between the two? I think it is also a challenging issue to explore gradually in the process of evolution.
Financial services have always been based on information, and the degree of information dependence on customers should be said to be very high. With regard to the problems that have just been related, is it now that some organizations feel that this information should not be left to me, but rely on the construction of public infrastructure, the credit information system and some large organizations to provide information? This is indeed a problem, that is to say, it is likely that many of them involve inclusive, grass-roots finance, micro-finance, such as agriculture, countryside and farmers. It may still need its own unique and exclusive grassroots information.
Secondly, there is an unchanged law, and wind control and supervision are still crucial links. We also see that there are some people who are enthusiastic about inclusive finance. Of course, there are some people who are under the cover of inclusive finance. They may pay more attention to some other goals, but often because of the problems of wind control, risk management, risk identification and supervision, there are many problems.
If we want to reduce risks, we should provide more safeguards besides our own wind control and supervision construction, especially in the financial system, in the implementation of accounting standards and accounting standards, we should do more and better in risk assessment, rather than neglect. Because some people think thats what big financial institutions do, small financial institutions may not necessarily do.
Thirdly, there is another point, which is related to the reform of rural credit cooperatives. We need to balance the incentive mechanism and social responsibility, and achieve a better combination. People often emphasize social responsibility, but if the incentive mechanism is unreasonably designed, it will affect the financial sustainability of inclusive finance, which direction the enthusiasm will play; even if it is not well done, it encourages some fake activities. Therefore, we say that it is very important to design a good incentive mechanism.
As far as Chinas situation is concerned and the worlds situation is concerned, we have both achievements and lessons. I wont say much about our achievements. It is estimated that we have a lot of figures. Especially, we have a lot of figures that are beyond the imagination of the general international community. If he did not look at the figures in detail, he would not think that some indicators of China in this regard can reach such a level. I will not list them in detail within the time limit. He is an imaginary speculation. In fact, there are still many achievements.
There are also lessons to be learned, one of which is the issue of sustainability. On the issue of rural finance, we have gone through three profoundly summing-up processes:
1. In the early period, the rural financial cooperative system was emphasized. Of course, the cooperative system itself is not a problem, and the cooperative system is definitely a model worth exploring. At that time, from the cooperative system to the rural cooperative, the financial cooperation could not use the capital fund, which actually weakened its ability to bear the risk. When the economy changed, there was a great vulnerability, and then there were some survival problems, leading to the fact that it did not continue to develop perfectly.
2. The second big problem is the rural foundation between the Asian financial crisis. The rural foundation has a big problem. In terms of financial form and health, the ability to resist risks and corporate governance have some deformities. As a result, during the Asian financial turmoil, a large area of collapse occurred. Later, the Peoples Bank of China took the measures of closure and rescue. For this reason, the Peoples Bank of China borrowed a lot of money from local governments to rescue.
3. The latest is P2P online loan. There are still some good new things in P2P online lending. The motivation is also to develop inclusive finance. However, some aspects still violate the basic rules of financial health, sustainability and supervision, so there are also large-scale problems. These are worthy of deep summary.
We can see that while the new science and technology industry is engaged in inclusive finance, there are also a lot of what we call hack. That is to say, it is more flirtatious, not so down-to-earth and objective. It only talks about one aspect, only about the good aspect, and does not pay enough attention to the risk aspect and vulnerability aspect. There will also be some problems. Therefore, there are many lessons to be learned.
At present, we are also facing many important challenges.
There are many aspects, I will choose several aspects to talk about.
Infrastructure is to provide more healthy, reliable and credible public services to many diversified, small and medium-sized financial service institutions. Of course, some infrastructure can also be in the form of PPP, that is, public sector, such as the Ministry of Finance, the Central Bank or regulatory authorities, or private sector participation, which is also feasible. But in a word, we should also emphasize the importance of improving infrastructure. Infrastructure is not limited to credit reporting, it is a series of infrastructure, including trading platform, asset registration and trusteeship, transaction records, payment system payment and liquidation, and so on.
Second, institutions focusing on Inclusive Finance need to find out what their information advantages are.
Financial services are built on the basis of information. It is like we are engaged in industry and export. We are always talking about what your comparative advantages are, what you want to do without comparative advantages and what you are busy with. In order to provide inclusive financial services, we have to answer the question of what is your information advantage. So we can do better than others in this respect, more efficient than others, but also safer and more reliable.
In the mid-1990s, Chinas fiscal revenue accounted for about 11% of GDP. Its hard for some developed countries or wealthier countries to give very clear and strong financial support. But even in this case, we can come up with some other ways, including some different monetary policies, including some places. Government practice. If inclusive finance can be broader and more reasonable in price, it may also need better development of insurance for various risks and green development.
At the same time, agricultural futures in the field of agriculture, countryside and farmers, as futures, can obtain the selling price beforehand, and at the same time can have insurance for climate disasters in planting industry, pests and diseases in breeding industry, so as to form an insurance credit mechanism based on priced and guaranteed agricultural orders.
In addition to these challenges, deviation should also be prevented. Because of the development of science and technology, the temptation of capital market financing and IPO, there are some ways to make quick profits. We also see that some financial institutions, including some private financial institutions, are affected by this trend of thought. Some things have made wrong choices, but also learned painful lessons. Therefore, how to prevent deviation also needs to be brought to your attention.
At the beginning, I emphasized that inclusive finance should focus on sustainability. The definition of Inclusive Finance is that the G20 Working Group has made a very accurate positioning. But at the same time, if compared with other countries, especially Latin America, there are many populist policies, mainly some politicians may pursue short-term gains and voting support. Give priority to benefits rather than to sustainability. But I see some examples of those countries, and I also feel that some are not the problems of politicians themselves, because they all want to do good to the people, and they also have election mechanisms. But some problems are caused by the economic policy team, the economic policy advisory team, which has the wrong tendency, misleading, including their own understanding.
Supporting sustainability and unsustainability, some unsustainable populist policies may become untenable over time. It is very clear that China can also apply to the relationship between finance and the real economy, that is, whether to teach people to fish or to fish, whether to benefit you or to teach people to improve productivity. Only by improving productivity, especially on the supply side, can Inclusive Finance be sustainable.
Demand side also needs a lot of inclusive finance, but we also need to prevent excessive consumer credit problems in some countriescredit card crisis. Of course, we need to distinguish them.
In the past, in Chinas finance, the reform of basic-level financial institutions and the real economy were symbiotic, which was not acceptable, because most people had some zero-sum concepts at that time. For example, in a rural area, they saw several people engaged in credit cooperatives, while others planted land. If people engaged in credit cooperatives, they might have higher incomes. If they gave up some benefits, the peasants would have a higher income. The people are rich, which is a thought called zero-sum.
The idea of symbiosis is that we must let finance support the development of peasant households, but at the same time, credit cooperatives must also have reasonable financial returns, rationalization of prices, and reflection of risks, so that credit cooperatives can be financially healthy, and at the same time, they can continue to accumulate slightly in capital, in order to continue to grow with the real economy.
Fourthly, and finally, we should examine the incentive mechanism in detail.
Personally, I would like to see all kinds of institutions of inclusive finance, whether traditional institutions, such as traditional rural credit cooperatives, agricultural commercial banks, small urban commercial banks. In a word, these institutions are collectively called community-based financial institutions and new technology-based ones. They are not limited to regions, nor are they really community-based or grass-roots. What is the relationship between future finance and real economy? In the past, the relationship between banks and enterprises is an important aspect, but it is not limited to banks and enterprises, because there are insurance, securities, agricultural futures and so on. Now it should be a very broad concept, including payment and so on. In the future, the relationship between banks and enterprises will be studied more deeply, which will make the small and medium-sized inclusive financial institutions really have a clearer direction and space for development. I hope to sort out this meeting slightly from these aspects, because I havent heard all of them before. At the same time, I dont want to talk about all aspects. I just want to talk about a few points and make mistakes. Please criticize and give advice. Thank you! (This article is from Zhou Xiaochuan, President of China Finance Society and former President of the Peoples Bank of China, who delivered a speech at the China Inclusive Finance International Forum in 2019.) Source: Responsible Editor of Netease Research Bureau: Yang Zeyu_NF6036
Personally, I would like to see all kinds of institutions of inclusive finance, whether traditional institutions, such as traditional rural credit cooperatives, agricultural commercial banks, small urban commercial banks. In a word, these institutions are collectively called community-based financial institutions and new technology-based ones. They are not limited to regions, nor are they really community-based or grass-roots. What is the relationship between future finance and real economy? In the past, the relationship between banks and enterprises is an important aspect, but it is not limited to banks and enterprises, because there are insurance, securities, agricultural futures and so on. Now it should be a very broad concept, including payment and so on. In the future, the relationship between banks and enterprises will be studied more deeply, which will make the small and medium-sized inclusive financial institutions really have a clearer direction and space for development.
I hope to sort out this meeting slightly from these aspects, because I havent heard all of them before. At the same time, I dont want to talk about all aspects. I just want to talk about a few points and make mistakes. Please criticize and give advice. Thank you!
(This is a speech by Zhou Xiaochuan, President of China Financial Society and former President of the Peoples Bank of China, at the China Inclusive Finance International Forum in 2019)