Li Yang: It is necessary to change the pattern of Funds in China's bond market "coming from the banks and returning to the banks."

The Paper's reporter Zhou Wei

Li Yang, chairman of the National Finance and Development Laboratory and member of the Faculty of the Chinese Academy of Social Sciences, took a photo by Zhou Wei, a reporter for the paper

On July 17, at the opening ceremony of the 2021 China Currency Brokerage Forum and Ueda Yagi Currency Brokers (China), Li Yang, chairman of the National Finance and Development Laboratory and a member of the Faculty of the Chinese Academy of Social Sciences, said that China's bond market has lacked safe assets in recent years, and the market situation is different from the world trend and the trend of developed countries. It is necessary to change the pattern of capital flows in China's bond market "coming from the banks and returning to the banks" and forming a pattern of "coming from the banks and non-financial sectors and going to the market" in the market.

Li Yang said that China's bond market has had an era dominated by safe assets, and in 2008, the proportion of safe assets in China's bond market was about 3/4, but in 2019, the proportion of bonds of the same caliber fell to less than 1/4, which is different from the trend of the world and the trend of developed countries.

Li Yang said that the safe asset market is the liquidity management of financial institutions, is the main platform for the central bank to carry out open market operations, this market determines the benchmark interest rate level, determines the risk-free yield curve, and restricts the efficiency of financial macro-control. In an open economic environment, this market constitutes the main platform for the internationalization of a country's currency.

He pointed out that steadily increasing the proportion of safe assets in the debt market is an important task of China's financial reform.

In addition, Li Yang also said that the investor structure of the bond market should also be adjusted. He pointed out that most of China's bonds are purchased and held by financial institutions, making it difficult for the bond market to play its function of improving the level of marketization, and distorting the supply and demand relationship between market funds. Moreover, risks that occur in the bond market and risks that occur on the balance sheets of commercial banks can spill over into each other.

Li Yang pointed out that changing the pattern of capital flows in China's bond market "coming from the banks and returning to the banks" and forming a pattern of "coming from the banks and non-financial sectors and going to the market" is the main task of China's bond market reform.

The reform of the bond market is also related to the internationalization of the renminbi.

Li Yang said that the international status of a country's currency is mainly reflected in the role played by international trade and international financial markets as price standards, payment and clearing tools, hedging tools and value storage tools. This status can be measured in four dimensions: the international debt market, foreign exchange transactions, global payments and foreign exchange reserves. Although the proportion of the renminbi in these areas has shown a strong growth momentum, due to the low starting point, the renminbi is still on the fringes of international currencies.

"Nevertheless, we must unswervingly promote the internationalization of the renminbi, among which the development of an efficient bond market and the active promotion of non-residents to purchase and hold rmb-denominated financial assets occupy an important position." Li Yang said.

When talking about financial infrastructure and the development of financial technology, Li Yang said that financial infrastructure plays a vital role in the financial system and broader economic activities, is the basis for ensuring financial efficiency and financial stability, and is the basis for ensuring the real economy of financial services.

At present, the United States has the most complete and efficient financial infrastructure in the world, and its financial infrastructure actually constitutes the infrastructure of international finance, which is the main embodiment of its financial competitiveness.

Although China has strengthened the construction of financial infrastructure in recent years and greatly improved the efficiency of financial infrastructure through the introduction of financial technology, compared with the United States, there is still a big gap in general, especially in the internationalization and openness of financial infrastructure, the gap is even more disparity, Li Yang believes that China must catch up in this field.

Li Yang called financial technology "a place to improve competitiveness": financial technology is technology-driven financial innovation, which aims to use modern scientific and technological achievements to transform or innovate financial products, business models, business processes, etc., to promote financial development and improve quality and efficiency. He pointed out that the financial industry has always been the main field of technology application, and the use of financial technology to transform traditional finance is the basic way of financial development. Therefore, the development of financial technology determines the future competitiveness of the financial system of a country and a place.

By comparing the financial technology development models of China, the United States and the United Kingdom, Li Yang summarized the three major driving forces for the development of financial technology, namely demand, technology and system.

China's fintech development stems from demand-driven growth. China's traditional financial services are seriously insufficient, providing an opportunity for technology companies to emerge in the supply of basic financial services, especially in payment and clearing. The huge population base has brought considerable customer demand, making China develop rapidly in the fields of digital banking, platform financing, investment and wealth management, insurance, and electronic payment. Platform drainage greatly enriches the application scenarios.

Fintech development in the United States is driven by technology. The United States has always maintained a leading position in technological innovation, most of the new fintech concepts originated in the United States, and several large technology companies have led the development of fintech. Eight of the top 10 companies by global market capitalization in 2019 were U.S. companies, most of them in the tech industry. In addition, the mature traditional financial industry in the United States is also actively seeking transformation, continuously enhancing investment in research and development, mostly for the implementation of "disruptive technologies" within institutions.

The UK's financial technology is mainly reflected in institutional guarantees, including the protection of property rights, information, privacy, etc., which can attract a large number of high-tech companies to create and attract a large number of high-tech talents to settle down.

Editor-in-Charge: Zheng Jingxin