Follow the path of financial development with Chinese characteristics and promote high-quality economic growth

Clerical Ocean

With the profound changes in the global political and economic landscape and the rapid progress of science and technology, China's economy is at a critical juncture, facing a series of internal and external challenges, as well as important development opportunities. The recent Central Economic Work Conference has deployed key tasks for 2024 around high-quality economic development. As the bloodline of the national economy and an important part of the country's core competitiveness, finance must play a vital role in it. Adhering to the path of financial development with Chinese characteristics and promoting high-quality economic development with a financial power is not only an inevitable requirement to cope with the current economic situation, but also a strategic choice to lead future economic development.

1. The great achievements and theoretical connotations of the road of financial development with Chinese characteristics

Since the founding of the People's Republic of China, the Communist Party of China has led the people of the whole country in continuous struggle and made great achievements one after another. With economic development, China's financial industry has undergone earth-shaking changes, from a single financial structure in the early days to a multi-layered, wide-ranging and differentiated financial system today. Since the 18th National Congress of the Communist Party of China, the financial system has been continuously improved, the financial market has continued to expand, and the ability to provide financial services to the real economy has been continuously improved. In terms of financial institutions, at the end of the third quarter of 2023, the total assets of financial institutions reached 452.82 trillion yuan, ranking first in the world in terms of total assets of the banking industry. In terms of financial markets, there will be 4,917 domestic listed companies in 2022, twice the number of 10 years ago, and the total market capitalization ranks second in the world. In terms of financial reform, China has pursued gradual financial reform, firmly guarded the bottom line of preventing systemic risks, and safeguarded national security. In terms of financial opening-up, the domestic RMB financial assets held by foreign entities have increased by 2.4 times compared with a decade ago, and the RMB has successfully joined the International Monetary Fund's Special Drawing Rights (SDRs), becoming the third largest basket of currencies. Looking back on history, the pace of China's financial development has been firm and powerful, and it has embarked on its own path of financial development with Chinese characteristics, effectively supported the rapid growth of the country's economy and the development of various social undertakings, and provided "Chinese solutions" and contributed "Chinese wisdom" to the world's financial development.

China's financial development contains profound historical and theoretical logic, which is deeply rooted in the financial thought of Marx and Engels, and integrates learning and learning from the experience of Western financial development. Before Marx, the study of finance focused on the theory of money and trade. Marx described the development of finance along with the transformation of the social mode of production from the depth of history, systematically summarized the relationship between money capital and industrial capital, and put forward the famous theory of capital circulation and accumulation, the theory of interest-bearing capital and the theory of financial crisis of its own system, which became the important basis of Schumpeter's theory of financial innovation and Harold-Thomas's economic growth framework. After the Second World War, the financial industry in the Western world grew rapidly. The relationship between financial development and economic development has attracted attention, and the theory of financial structure and financial deepening has come into being. However, the failure of the classical Western theory of financial development to inherit the core of Marx's financial thought and discuss financial development in isolation from the order of industry, economic development and reform not only led to the setback of the financial liberalization movement in emerging market countries in the 70s and 80s, but also the fundamental cause of the "Great Recession" triggered by the subprime mortgage crisis in this century. Different from the financial reform process in the West, China's financial development pays more attention to the purpose of serving the real economy, implements gradual financial reform, and proposes financial supply-side structural reform, which effectively supports the steady and rapid development of the economy.

Second, do a good job in the "five major articles" of China's financial industry to serve the high-quality growth of the economy

The 2023 Central Economic Work Conference emphasizes the work of the new year around high-quality development, which is not only a comprehensive plan for high-quality economic development, but also closely linked with the "five major articles" proposed by the Central Financial Work Conference, providing a broad space for the development of the financial sector.

First of all, scientific and technological innovation is the fundamental driving force of economic growth, so the "five major articles" are headed by science and technology finance. In recent years, the deep integration of artificial intelligence, blockchain, big data and other technologies is setting off a new round of global industrial revolution, especially since 2023, breakthroughs in the field of natural language processing have changed the way of human-machine communication and provided unlimited possibilities for emerging industries. Throughout the history of human development, the industrial revolution has always arisen from technological innovation and achieved from financial innovation. Marx's financial thought emphasizes that the relationship between finance and enterprises and industry is the key to whether finance can effectively promote economic development. With the industrial renewal and iteration, the mainland will face a new round of technological revolution and global industrial competition. In the new year, the key to whether China's financial development can effectively promote economic growth is how China's financial system can more fully consider the development trend of science and technology in its operation and investment decisions, realize the advance allocation of financial resources, lead industrial upgrading, and achieve technological innovation through financial innovation.

Second, in the field of green finance, environmental and climate issues are not only "hard constraints" to global economic development, but also a rare glue and "lingua franca" in the current divergent world pattern. As of the end of the third quarter of 2023, the balance of green loans in local and foreign currencies in mainland China was 28.58 trillion yuan, and the development level of green finance has ranked among the top in the world. The development of green finance in China has significantly improved the quality of economic development, not only effectively guiding the flow of funds to green and low-carbon fields, but also establishing a good image for Chinese financial institutions in the international financial market, and beginning to lead the practice of green finance in other countries around the world.

Third, in terms of inclusive finance, serving small and micro enterprises and helping low-income groups can promote social equity, ensure labor supply and expand effective demand, thereby improving the quality of economic growth, and opening up new markets for the financial industry itself. In recent years, China has made great progress in the development of inclusive finance, with significant improvements in the coverage, availability and satisfaction of financial services, rapid development of mobile payment, digital credit and other businesses, and continuous improvement of financial services in the fields of small and micro enterprises and the "three rural" areas. In particular, China's microfinance for rural households, with low interest rates, financial discounts, and systematic assistance measures, has effectively solved the problems of unsustainable government subsidies or high real interest rates encountered in the international financial anti-poverty practice, and has embarked on its own unique development model. In 2023, the State Council's Implementation Opinions on Promoting the High-quality Development of Inclusive Finance was released, which comprehensively and systematically formulated a policy framework and implementation path, and placed more emphasis on risk management and financial stability issues in the process of inclusive financial development, providing a solid policy foundation and organizational guarantee for promoting high-quality economic growth through inclusive financial development.

Fourth, in terms of pension finance, the change of demographic structure will profoundly affect the development model of China's economy, the future of the society for the demand for pension financial products and services will further increase, the construction of a new population structure, effective service of the silver economy of the pension financial system is imperative. From the perspective of economic growth, on the one hand, whether or not the diversified consumption and investment needs of the elderly can be satisfied has a direct bearing on the aggregate economic demand; on the other hand, the elderly can "take care of the elderly" and "do something for the elderly", so that the young people can better devote themselves to work and raise children, which directly affects the supply of labor and the potential for economic growth. The development of a coordinated, fair and sustainable modern ageing financial system is the realistic demand of China's economic development, and it is the direct embodiment of the "people's nature" of finance. In recent years, the state has promoted financial institutions to actively participate in the construction of the personal pension system, and steadily promoted the development of various commercial pension financial services, and achieved remarkable results.

Fifth, in the field of digital finance, the current financial industry is increasingly becoming a comprehensive service and management system that integrates economic activities and modern information technology. Digital finance occupies a unique position in the "five big articles". Digital technology can reduce transaction costs, improve transaction and processing speeds, and alleviate information asymmetry, thereby improving the accessibility of finance and more effectively serving specific application scenarios such as technology, green, inclusive, and elderly care, which are directly related to the above four aspects. From this perspective, digital finance improves the efficiency and coverage of financial services, can provide faster and more accessible financial services, helps reduce the cost of financial services, improves the transparency of financial markets, and plays a key role in promoting economic growth. At the same time, the development of digital finance is also accompanied by risks and challenges from data security and online financial crimes. The healthy development of digital finance requires innovative regulatory methods, improved regulatory capabilities, and effective identification and prediction of risks, which puts forward new requirements for regulatory authorities.

(The author is an associate professor and doctoral supervisor of the School of Finance, Southwestern University of Finance and Economics)