Li Dongrong: Some Thoughts and Understandings on the Development of the Financial Industry in the Era of Digital Economy (Full Text)

Source: Sina Finance-Ruijian Economy

Li Dongrong: The rapid development of digital technology will also produce a "digital divide" and "algorithmic discrimination"

The 20th China International Finance Forum was held on December 14-15, 2023 in Hongkou District, Shanghai. Li Dongrong, former deputy governor of the People's Bank of China, attended and delivered a speech.

Li Dongrong said in his speech that in the era of digital economy, new requirements have been put forward for financial services for the real economy.

In this regard, he put forward three suggestions on how to guide more financial resources to flow to digital technology innovation and the development of the digital economy, and provide more financial support for the stronger, better and bigger digital economy.

(1) Facilitate transformation and promote the deep integration of digital technology and the real economy

(2) Excellent services, using digital technology to improve the quality of the development of the financial industry

(3) Promote innovation and provide financial support for new industries, new forms of business and new models

Li Dongrong also emphasized that while enjoying the industry dividends brought by the development of digital finance, we should also be soberly aware that there are also some problems that need to be solved urgently in the process of further development of the digital economy.

For example, the rapid development of digital technology has created a "digital divide" and "algorithmic discrimination", which excludes some elderly people and other vulnerable groups, and undermines social fairness and justice.

"These require the financial industry to improve the awareness of financial information protection, enhance the security and compliance of data applications in the financial field, improve the level of digital financial governance, and effectively respond to the new challenges of financial risks in the context of the digital era, so that it can truly play a good role in serving economic and social development. He said.

The following is a transcript of the speech:

The digital economy is the main economic form after the agricultural economy and the industrial economy, and it is a new economic form with data resources as the key element, modern information network as the main carrier, and digital transformation of all factors as the important driving force to promote fairness and efficiency. The development of the digital economy is unprecedentedly fast, wide-ranging, and influential, and is driving profound changes in the mode of production, lifestyle, and governance, and has become a key force in reorganizing global factor resources, reshaping the global economic structure, and changing the global competitive landscape. During the "14th Five-Year Plan" period, the mainland's digital economy has shifted to a new stage of deepening application, standardized development, and inclusive sharing. In order to cope with the new situation and new challenges, grasp the new opportunities of digital development, expand new space for economic development, and promote the healthy development of the mainland's digital economy, the financial industry has an unshirkable responsibility.

Below, I would like to briefly talk about some thoughts and understandings on the development of the financial industry in the era of digital economy based on the theme of the conference and my personal work experience in the field of digital finance. FYI.

1. The current situation of the development of the digital economy in mainland China

With the support of the national strategic layout and a series of policies, the mainland has made continuous breakthroughs in digital technology, and has made all-round efforts in all directions of new infrastructure, digital industrialization and industrial digitization, data element market and digital ecological construction. At present, the overall development of the mainland's digital economy has ranked among the world's first echelon, standing on the same starting line as the world's developed countries.

Specifically, the development of the mainland's digital economy presents the following three characteristics. First, the construction of digital infrastructure has achieved leapfrog development. The mainland has built the world's largest optical fiber network and 4G network, and the 5G network has also been fully deployed. The construction of the national integrated big data center is being accelerated, and the multi-directional and large-capacity international transmission network architecture has also been basically formed, providing strong support for the emerging business forms and integrated applications of the digital economy. Second, industrial digitalization continues to accelerate. With the continuous acceleration of the digital transformation of various industries, the basic digital capabilities of mainland enterprises have been steadily improved, and the level of intelligence and automation has been continuously enhanced, which is promoting the further development of the digital economy and extending to more industries and scenarios in the real economy. Third, the valorization of data is accelerating. The mainland government attaches great importance to the important role and economic value of data in economic development, and has successively issued a series of policy documents such as the "Opinions on Building a More Perfect System and Mechanism for Market-oriented Allocation of Factors" and the "Action Plan for Building a High-standard Market System" to accelerate the creation of a market-oriented allocation mechanism for data elements that is effective in the market, promising for the government, beneficial to enterprises and beneficial to individuals.

2. The development trend of the mainland's financial industry in the era of digital economy

In the context of the vigorous development of the digital economy, the financial sector is also setting off a comprehensive and profound transformation.

(1) Further integration of industry and finance

The continuous innovation of technology will change the mode of production and optimize the industrial structure. As a means of resource allocation, along with technological changes, the form of finance will continue to evolve, and the degree of integration with the industry will gradually increase.

Specifically, the integration of industry and finance is divided into three stages of development: the first stage is only for a single enterprise to carry out corporate financial business "point" structure; the second stage is to take the leading enterprises of the supply chain as the core, relying on the relationship between supply and demand, to form a "chain" structure that extends to its upstream and downstream, and the third stage, in the era of digital economy, the combination of industry and finance is to form a "network" covering all elements of the supply chain structure, transform real-time data information into financial credit, combine subject credit and transaction credit, create a credible trade chain and a credible financial chain, and realize a virtuous circle of mutual promotion of financing efficiency improvement and industrial upgrading. It can be seen that under the "network" structure, the rapid flow of various resource elements represented by data and the accelerated integration of various market entities can improve the quality of economic development, reduce operating costs, and effectively solve the economic dilemma of the real industry.

(2) The digital transformation of financial institutions is accelerating

The rapid development of the digital economy has generated massive amounts of data, which provide sufficient means of production for the development of digital finance. Therefore, only by accelerating digital transformation can financial institutions improve their "adaptability" to the digital economy and enhance their ability to serve the real economy.

On the one hand, financial institutions should focus on improving data management capabilities and accelerating the creation of lightweight and agile organizations. By building a cross-departmental and cross-level technology and business collaboration organization, we can improve the efficiency of product and service innovation and iteration, and improve the speed of responding to market and customer needs. Through comprehensive transformation and reengineering, we will cultivate and form an organizational model and digital culture with agility, openness, inclusiveness, and innovation as the background, so as to "adapt" to technological development and digital transformation.

On the other hand, financial institutions should deeply explore the value of data and accelerate the digital transformation of their business. Taking precise customer marketing as an example, in recent years, financial institutions have accelerated online customer expansion, actively expanded the construction of global and private domain marketing systems, and built a customer-centric omni-channel service matrix.

(3) Digital technology drives the development of green finance

In the context of "carbon peak and carbon neutrality", the state has issued a number of policies to support the development of green finance. In December 2021, the People's Bank of China released the "Fintech Development Plan (2022-2025)", which emphasizes that financial innovation drives development, promotes financial digital transformation with high quality, adheres to the development principles of "digital driven, smart for the people, green and low-carbon, fair and inclusive", and puts forward eight key tasks, showing the importance of digital-driven green finance. Digital finance can use massive information to carry out multi-dimensional data analysis, explore information such as counterparties' performance ability and willingness to perform, reduce information asymmetry, and promote the sustainable development of green finance.

In the future, the main development priorities of green finance are as follows: First, green credit products and businesses will be further enriched. Financial institutions can use digital platforms to innovate green credit products and provide different financing services for different types of enterprises. Second, green finance supply chain services will be further developed. Financial institutions use blockchain technology to provide personalized products for upstream, midstream and downstream enterprises in the green industry, expand the coverage of green products and services, and attract more high-quality green customers. Third, further innovation of green financial derivatives. Design financial derivatives with "green" characteristics, such as green REITs, green asset securitization, etc., and develop diversified digital green finance application scenarios.

3. Specific measures for financial services for the real economy in the era of digital economy

In the era of digital economy, new requirements have been put forward for financial services for the real economy. Below, I would like to put forward three suggestions on how to guide more financial resources to flow to digital technology innovation and the development of the digital economy, and provide more financial support for the stronger, better and bigger digital economy.

(1) Facilitate transformation and promote the deep integration of digital technology and the real economy

The digital economy is not only a new economic growth point, but also a fulcrum for the transformation and upgrading of traditional industries. Therefore, how to use the new Internet technology to carry out all-round and full-chain transformation of traditional industries, improve the data collection and use of the industrial chain, realize the interconnection of data assets, improve total factor productivity, and then give full play to the amplification, superposition and multiplication role of finance in economic development has become the main topic of how finance serves the digital economy. On the one hand, in the process of industrial transformation and upgrading, the financial industry can play a boosting role in providing key financial support for promoting the integrated development of the digital economy and the real economy through the establishment of special loans for digital transformation and digital industry development funds, and inject new momentum and vitality into the digital transformation of traditional industries. On the other hand, financial institutions can also evaluate the credit status of customers more accurately based on the collected data of the whole life cycle of enterprises, and provide data-based credit loans, so as to ultimately promote the development of the real economy towards higher quality development and realize the symbiosis, co-prosperity and common growth of finance and the real economy.

(2) Excellent services, using digital technology to improve the quality of the development of the financial industry

The large-scale application of digital technology and the rapid development of the digital economy not only pose challenges to traditional financial services, but also provide opportunities for financial institutions to improve their service capabilities. The financial industry itself is a cutting-edge industry in the application of information technology, and it is also one of the industries with the most complete information infrastructure and the most abundant data resources in mainland China. In recent years, new forms of digital economy such as smart payment, smart outlets, robo-advisory, and digital financing have been widely emerging in various fields of the financial industry. Practice has proved that by using digital technology to create new formats, new applications and new models of digital finance, the efficiency of financial services can be greatly improved, the radius of financial services can be extended, the types of financial services can be expanded, and the coverage and benefits of inclusive finance can be expanded.

(3) Promote innovation and provide financial support for new industries, new forms of business and new models

With the rapid development of digital technology, in order to promote the development of the digital economy, it is necessary to let the new industries, new formats and new models of the digital economy be nourished by more financial living water and fully release the vitality of innovation and development. In order to achieve this goal, on the one hand, it is necessary to guide financial institutions to optimize the credit structure, innovate the logic of traditional financing models, make digital information creditworthy, change the dependence on core enterprises, and provide more flexible and personalized financing solutions for science and technology enterprises to meet their financing needs at different stages and break through the financing "blockages" of science and technology enterprises; The new business format provides sufficient and more financial nourishment, and we can explore the provision of more professional and efficient financial services for scientific and technological innovation through financial franchise institutions in new fields. In addition, we should also give full play to the role of the multi-level capital market, improve the direct financing system to promote scientific and technological innovation, expand the financing channels of market entities, improve the risk investment mechanism, guide social capital to invest in the field of scientific and technological innovation, provide more stable and long-term financial support for innovative enterprises, and better meet the development needs of innovative enterprises.

Of course, while enjoying the industry dividends brought by the development of digital finance, we should also be soberly aware that there are also some problems that need to be solved urgently in the process of further development of the digital economy. For example, the rapid development of digital technology has created a "digital divide" and "algorithmic discrimination", which excludes some elderly people and other vulnerable groups, and undermines social fairness and justice. These require the financial industry to improve the awareness of financial information protection, enhance the security and compliance of data applications in the financial field, improve the level of digital financial governance, and effectively respond to the new challenges of financial risks in the context of the digital era, so that it can truly play a good role in serving economic and social development.

Ladies and gentlemen, finance is the core of the modern economy and an important force to promote economic and social development. Promoting the healthy development of the digital economy and providing more financial support for the stronger, better and bigger digital economy is a "must-answer question" for the financial industry, and we sincerely hope that more people of insight can participate in relevant research and practical work, and continue to add new momentum and cultivate new advantages for the high-quality development of China's economy.