The icing on the cake of finance and the charcoal in the snow: improve inclusive finance to support the construction of a common prosperity mechanism

This article is mr. Jia Kang's online speech at the 8th Financial CSR Forum (2021, 12, 8).

Hello everyone! I am delighted to have the opportunity to join the discussions of the 8th Financial CSR Forum online. In my remarks, in connection with the important issue of the financial mission under the common prosperity orientation that we should pay special attention to, I would like to talk about my own analysis of the concept that mainly corresponds to the perspective of inclusive finance to support common prosperity. This pair of concepts is the "icing on the cake" mechanism of finance, and how to match the "charcoal in the snow" mechanism that is more conducive to promoting common prosperity under the orientation of inclusiveness.

This proposition has a distinct correspondence in real life. We know that in the process of the development of China's socialist market economy, after decades of discussion, a basic consensus has been formed: finance must be better played by reform and innovation, finance must be diversified, and finance must be able to fully implement its functions to support the financing needs of thousands of enterprises in the first line of our production and operation activities and the front line of entrepreneurial and innovative activities in the middle of the process of upgrading and development that supports the development of the real economy, especially in the stage of high-quality development. If we are under the concept of commercial finance, we must admit that it is actually a mechanism that adds to the cake. It is the main body of commercial finance that has the ability to provide loans, and they must consider the issuance of their own loans to prefer those who have a high project success rate, low risk and good capital security after giving financing support to provide loans. Such a kind of business financial entities in the business of business and their own control of risks and sustainable development of the icing on the cake to match the operation, that is, a resource allocation optimization mechanism - the provision of funds must be returned the use of commercial finance funds, according to the icing on the cake orientation, according to our statement is to continue to support the micro-benefits of better projects, so that they get more adequate financial support, the development of the whole society in the future should have the stamina, should show the overall prosperity characteristics, In order to be better reflected under financial support.

In the 1980s, we summed up such a mechanism - banks must first position themselves as enterprises, and they are talking about business, so that the vast number of enterprises in the real economy supported by banks can they also become real enterprises, and there is a mechanism of survival of the fittest in competition, and the survival of the fittest mechanism brings about such a function of liberating productive forces to support our development and optimal allocation of resources. However, it should be said that this icing on the cake mechanism and the function it plays do have limitations. In real life, we all know that there is another important concept that the market also has its flaws and failures. There are some economic activities that need to be supported by "charcoal in the snow" financing in the middle of the operation of the market economy, and what we also feel in the middle of actual life is that it cannot be ignored. For example, we must fully consider how to support entrepreneurial and innovative activities under the concept of "three rural areas". We must fully consider how to support small and micro enterprises in their production and operation activities at the level of grassroots entrepreneurship and innovation to be sunshined by finance. We must also consider how some of the innovation activities of small and scattered technology companies, especially their innovation activities, can be supported by loan financing. These problems of how to get financing support for rural areas, small and micro enterprises, and scientific and technological innovation in specific scenarios are directly connected to the problem of inclusive finance. Inclusiveness is in addition to these economic operation areas that can be supported by the original traditional commercial finance, and there is a broader vision, so that our financial effective supply can cover these objects, and there is such a progress to overcome the lack of financial inclusion in the past. That is to say, under the concept of inclusive finance, we must pay attention to its functional improvement. This function of inclusive finance, of course, corresponds to the promotion of common prosperity that the central government now attaches special importance to and emphasizes. In our upgrading and development in the new stage of better supporting high-quality development, on August 17, 2021, the strong signal given by the central meeting is to make efforts to promote common prosperity, so that our development can better reflect high quality and reflect the essential characteristics of our socialist market economy.

In terms of financial aspects, I think it is obvious that the two concepts of icing on the cake and charcoal in the snow must be better combined. In the process of making the cake bigger, we must pay attention to the actual policy tilt support, plus some necessary policy guidance with redistribution characteristics, that is, the support role of some preferential policies, so that in the middle of our actual lives, the three rural areas, small and micro, scattered scientific and technological innovation activities, etc., get better financial support. In the future, in the land of China, in the construction of a new development pattern that promotes "double circulation" in China, their active role will be better reflected. This realistic problem of promoting common prosperity and promoting financial inclusion that we are pursuing certainly has its challenges and its complexities.

I think that if we look at some of the entry points that can be observed now, we can arrange some of these innovative mechanisms that I think are constructive, and let's discuss how to make them better dock with the orientation of common prosperity in the process of the development of inclusive finance, make our finance more diversified, and make our financial supply system better reflect the various production and operation activities that support the upgrading and development of the real economy and support our overall production and operation activities. It can also overcome some market defects and failures relatively well. I am willing to combine such a proposition with theory from the perspective of practice, and express it as a better and more coordinated response between policy finance and commercial finance, and a match between icing on the cake and sending charcoal in the snow.

I think there are several observation points that are worth summarizing practical experience and seriously exploring, or supporting practical financial innovation, better promoting common prosperity, and giving play to our due mission.

First, I think we should fully affirm that in these years we have seen that after the rise of the information revolution and the new technology revolution led by Silicon Valley, the development of science and technology finance has made commercial finance under the traditional concept of the boundary, still continue to control risks, in business business but has been able to expand its coverage. The most typical is that in the past, it was difficult to imagine that some small loan applications that could be accepted online can now be supported by information technology such as big data and cloud computing, and get a steady stream of financing on the supply side response. I specifically went to the digital platform company that has made certain development achievements a few years ago to do research, in the scene I saw the big screen displayed, that is, there is already a more reliable software design, with this big data cloud computing to support the software's own operation, "zero manual intervention" in the case, the Internet continues to accept applications for small loans, these small loans from the grassroots level of small and micro enterprises, the main body of grassroots entrepreneurial innovation activities, they these small loans, this kind of loan applied for online, Under the circumstance that the risk of the supply side is controllable, it is issued out by the financing support mechanism that generally does not exceed the level of the medium-interest loan, which is reflected on the big screen, constantly scrolling, and allocating out one by one. After I looked at it for a while, I found that the smallest sum was only 3,000 yuan, and the largest two or three sums were not more than 200,000 yuan. This typical micro-loan can be uninterrupted and sustainable in this operating system, targeting some grassroots entrepreneurial and innovative entities that basically could not shine in the sunshine of our kind of loan financial services in the past, so that they can get unprecedented loan support. Of course, the reason for this is very worthwhile for us to continue to analyze and understand the development of inclusive finance in the future, and to promote its further role. In general, I observe that the basis for risk control mastered by this operating mechanism is the project risk determination supported by technical conditions. Of course, the big premise is that the electronic traces of the main body applying for small loans in the past economic activities can be supported by big data and convenient cloud computing algorithms in information processing, and can be summarized and judged quite quickly. In this way, the continuous issuance of small loans has expanded the coverage of commercial finance and extended its boundaries by relying on technical support, which is very worthy of our affirmation. This is what I feel should first be recognized under the concept of commercial finance, which does not violate its specific requirements in risk control, and is still a positive progress in docking inclusive finance in the actual innovation process on the basis of the business position. But at the same time, we must be aware of its limitations: because of the online acceptance of small loan applications, the electronic traces of its application object are a necessary prerequisite. If you imagine, under the concept of "three rural areas", in the past, there may be no electronic traces in the database to find out that some of the main entities applying for loans, its production and operation activities need the support of small loans, it is still unable to get through such a system in their willingness, but also we think it is necessary to give this kind of financing support in the entire economic and social activities. Then the overcoming of this limitation cannot be within the scope of a single expansion of commercial finance by scientific and technological innovation, and it is believed that it can be solved relatively satisfactorily, and we must further push our thinking to the policy-oriented financial concept backed by financial funds: then at this time, one of the necessary prerequisites for sending charcoal in the snow is to have policy funds, which comes from the financial distribution system of "controlling finance with government and administering finance with finance" in the field of public resources. It is a market-oriented operation with policy funds, and professional management can produce a multiplier amplification effect, that is, a leveraged amplification result.

The most typical, is that first of all we have to look at the financial discount, which has an unprecedented large-scale application under the impact of the epidemic in 2020, the 1 trillion anti-epidemic special treasury bonds issued that year are almost 200 billion yuan that is specially arranged by the central finance to discount interest in this way, reaching the local frontline, forming preferential loans at the grass-roots level, and supporting a large number of small and micro enterprises to survive under the impact of the epidemic first, and then strive to fight against the cold and spend the winter. After the resumption of work and production, the new situation will be further developed in the future. In this way, there are extraordinary strategies in the critical extraordinary period, and the inclusive finance made of funds backed by finance can make commercial banks not change their position of adding icing on the cake in business talk and business, and integrate and dock with the actual function of sending charcoal in the snow.

Similarly, under the concept of policy-oriented finance, we should also actively promote policy-based credit guarantees, industrial guidance funds and government-private capital cooperation (PPP) mechanisms to play the role of inclusive finance. This kind of financial function that combines icing on the cake with charcoal in the snow to better fulfill the financial mission reflects the innovative development of the effective market and the limited government, and is also an important part of the supply-side structural reform as the main line to promote common prosperity and build China's modern economic system.

These views are reported for your reference. Thank you!

Jia Kang Introduction

He is a member of the 11th and 12th National Committee of the Chinese People's Political Consultative Conference, a special expert of the talent pool of the Current National Committee of the Chinese People's Political Consultative Conference on political participation and deliberation, the founding president of the Huaxia New Supply Economics Research Institute, and a researcher and doctoral supervisor of the Chinese Academy of Fiscal Sciences. He has long served as the director of the Institute of Fiscal Science of the Ministry of Finance. He is a special expert, consultant or advisory member of local governments in Beijing, Shanghai, Fujian, Anhui, Gansu, Guangxi, Tibet and other local governments, and a distinguished professor of Peking University, Chinese Min University, National School of Administration, Central Socialist College, Nankai University, Wuhan University, Xiamen University and other universities. In 1988, he was selected for the Heinz Foundation project and went to the University of Pittsburgh for one year as a visiting scholar. In 1995, he enjoyed the special government allowance of the State Council. In 1997, he was rated as the high-level academic leader of the National Million Talents Project. He has been invited by leading comrades of the party and the state to discuss economic work many times. He was one of the special speakers of the 18th collective study "Fiscal and Taxation System Reform" of the Politburo of the CPC Central Committee on January 8, 2010. Winner of the Sun Yefang Economics Prize, the Huangda-Mundell Economics Prize, and the China Soft Science Award. He is a member of the National Expert Committee of the 11th Five-Year Plan, the 12th Five-Year Plan and the 13th Five-Year Plan, and a member of the Expert Committee of the PPP Expert Database of the National Development and Reform Commission. In 2013, he edited "New Supply: China's Innovation in Economic Theory", initiated the establishment of the "Huaxia New Supply Economics Research Institute" and the "New Supply Economics 50 Forum" (as the first dean and the first secretary-general, and the chief economist during the second council), and from 2015 to 2016, he co-authored with Su Jingchun "New Supply Economics", "Supply Side Reform: A Concise Reader of New Supply" and "China's Barrier: How to Overcome the "Middle-Income Trap" (awarded by the China Book Critics Association and CCTV). 2016 China Good Books", published in 2016, "Ten Lectures on Supply-side Reform" was rated as a national excellent textbook by the Central Organization Department, the State Administration of Press, Publication, Radio, Film and Television, and the National Library. After 2017, he has written and published many monographs such as "Theoretical Model and Practical Path of Supply-side Structural Reform", "Future Finance and Taxation on the Main Line of Supply-side Reform", and "General Theory of Fiscal Science". According to the large statistical analysis of more than 7 million articles in 6268 academic journals of philosophy and science in China from 2006 to 2015 published by China Social Science Assessment, Mr. Jia Kang's publication volume (398 articles), total citation frequency (4231 times) and total download frequency (204115 times) all ranked first, and the comprehensive index was 3429, ranking first, and he was a representative scholar among the core authors of economics.