Shaping China’s Future Finance

“The integration between large financial institutions and new technologies would be a disruptive revolution,” said Zhu Min, chairman of the National Institute of Financial Research, at a session themed “How China Shapes the Future of Finance” during the ongoing 13th Annual Meeting of the New Champions of the World Economic Forum (WEF) that opened on July 1 in Dalian City, Liaoning Province.

As an important component of the national economy, finance plays a very important role in the day-to-day lives of each individual or corporation. With a banking sector twice that of the United States and capital markets stimulated by reform, China’s financial sector is shifting. As regulators crack down on shadow banking and banks reinvent themselves as tech companies, how are old and new actors transforming the future of China’s financial industry? Participants at the session tried to find answers to this question.

Embracing Fintech

According to Huang Yi, executive vice president of China Construction Bank, since the second half of the 1990s, with the increasingly popularity of cell phones and the internet, traditional financial institutions have begun to face challenges. This trend also urged them to wake up to embrace fintech powered by big data, blockchain and other cutting-edge technologies.

“In the past, we found it difficult to promote inclusive finance because, on the one hand, we focused on serving big businesses, and on the other hand, we lacked resources to serve so many small borrowers. Thanks to the introduction of new financial technologies, we can now be able to conduct credit surveys with much lower costs.”

While traditional financial institutions are opening their arms to fintech, a number of internet companies, represented by Alipay and WeChat Pay, have set foot in China’s financial sector as the thresholds of market access are lowered. The application of fintech has not only significantly increased the efficiency of financial services, but also made the financial market more open. “Fintech has brought about many opportunities to players in the market,” remarked Jan Metzger, head of banking, capital market of Citi Asia-Pacific, who was also a speaker at the session.

More Open Financial Market

China is actively promoting a policy to open up the financial sector and provide a level playing field in terms of ownership requirements for overseas and domestic capital, with experts predicting that financial opening up will accelerate in the next few years.

This prediction was echoed by speakers at the session. China is the second largest economy in the world, and the further opening up of its financial sector will present an opportunity to form a financial ecosystem, according to Metzger. “There will be tremendous opportunities,” he added.

The pace of RMB Internationalization has also become faster and faster in recent years. Li Zhengqiang, chairman of Dalian Commodity Exchange, hoped that there would be an international commodity futures market priced in RMB.

Globalization is a keyword at this year’s Annual Meeting of the New Champions. Also popularly known as Summer Davos, the event is held from July 1 to 3 in northeastern China’s coastal city of Dalian under the theme “Leadership 4.0: Succeeding in a New Era of Globalization.” 

The world has never been so globalized, and financial globalization is also an irreversible trend. With further opening up, China’s financial sector will gain greater momentum while making greater contribution to economic globalization in this new era.