Top professor gives lecture on financial reform, ideas exchange between university & enterprises - EMBA Lecture Series by Top Professors joined by Tiansheng New Materials & Fudan University in Changzhou
On October 16, the EMBA Lecture Series by Top Professors, which was joined by Tiansheng New Materials and Fudan University, came to Changzhou. Combined with a deep understanding and prospective study of China’s financial industry, Kong Aiguo, a professor of the College of Management of Fudan University, made a deep analysis of the reform logic and opportunity in financial markets for Changzhou entrepreneurs. At the event day, famous professors of Fudan, government leaders, business elites and corporate executives enjoyed a good time to communicate with each other.
Kong Aiguo,professor of Fudan University
Lecture Series by Top Professors in Changzhou
Tiansheng New Materials is a famous new materialshigh-tech enterprise, one of the undertaking units of new materials projects ofthe national 863 Program and one member of the entity manufacturing. It focuseson development for decades and gains rich experience on making exchanges andcooperation with universities, especially on research and development ofstructural foam materials that filling the gaps in China. On behalf of thejoint organizers of this event, Xu Yi, CEO of Tiansheng New Materials,expressed sincere welcome to the party of Fudan’s famous professor Kong. Xualso hoped to do more cooperation and exchanges in depth between enterprisesand universities, and to explore and share the frontier theory and practice ofmanagement.
Xu Yi, CEO ofTiansheng New Materials
Like a small sign can indicate a great trend,China’s current economy is facing a downward pressure. In the bewilderingenvironment of the international economic situation, how the finance may betterserve the real economy and mutually promote symbiosis is a nationalproposition. While how to foster innovation, transformation and upgrading,resist the economic winter and make a good combination between the industry andfinance is also a challenge to the enterprises which want to survive anddevelop in future.
Where is the source of this out-of-balance situationbetween the “money shortage” for real economy and “money overage” for virtualeconomy? How do the entrepreneurs understand the logic of financial reform fromdecision makers and grasp the market trend? Let us concentrate on the ProfessorKong’s speech on “Logic & Market Trends in China’s Financial Reform”.
1. Logic of financial market development: runningadmission under dilemma
At the beginning of the speech, Professor Kongdirectly points out the dilemma suffered by three sub-markets of financialmarkets, i.e. whether the currency market should be open or not, the capitalmarket should be commissioned or not , and the exchange market should be controlledor not.
Professor Kong believes that there are two majorreasons for the financial markets fall into a dilemma. One is the serious lagof systems, the other is the terrible imbalance in the structure.
Financial markets are always accompanied by risks.There are so many problems in China’s financial markets, but why people stillwilling to enter financial markets? It is mainly because of the entrepreneurswho are always waiting in line.
To solve this problem, Professor Kong gives hisanswer in this lecture. Despite the finance will not tolerate failure,entrepreneurs also have a lot of failure cases. Once the venture is successful,the wealth it creates can make up for failure of investment in other aspects.The profit-seeking characteristics of finance will make the society constantlycreate new wealth using the finance.
2. Background of financial market reform: laggingbehind leaves one vulnerable to attacks
On June 19, 2015, Federal ReserveChairman Ben Bernanke announced that the US Central Bank would endits 5-year implementation of the quantitative easing policy. The lending rateof Bank of China overnight hit a new high on record at the next day. Thefollowing Monday, the Shanghai Composite Index experienced the largest one-daydrop in four years and it stopped until the People’s Bank of China announcedthat it would inject more money to stabilize the financial system.
Professor Kong points out that there does not have asubstantial liquidity shortage in China by using this case. On one hand, thesmall and medium-size enterprises are in urgent need of funds; on the otherhand, the bank loans flow to the speculative shadow banking’s financialproducts. Owing to the differences in the nature of enterprises, the productionmarket is open while the financial market is not, this will lead directly tothe structural imbalance in the economy. All these point to the same oneproblem that is the financial reform demands immediate attention.
3. Direction of financial market reform: promotereform in progressive manner
Where is the connection point between the realeconomy and the financial market? How to release the constraints of finance?Focusing on these problems, Professor Kong notices that the main purpose of theinstitutional reform of the capital market is to provide enough space to revitalizethe market of bank’s asset-backed securities, and to give more spacefor the enterprises’ long-term financing. The institutional reform of thecapital market can improve the market depth through reformsfor listing system, and it will attract excellent enterprises deeplyinvolved in the capital operation. In this way,transitivityeffects of the multi-level market can also mobilize activities ofcorporations in different levels by the expanding width of the market.
Regarding to the reform of the stock and the foreignexchange market, Professor Kong considers that the establishment of localequity trading centers is able to provide fresh blood to the venturemarket, and then the venture market can provide new resources to thesmall- and medium-sized enterprise board and the main board.Nevertheless, referring to the reform of the foreign exchange market, ProfessorKong holds the attitude “do not worry”. He believes that the RMB does not havethe characteristics of a global settlement and reserve currency, so the reformprocess cannot be hasty and it should be steady to form a solid foundation.
Professor Kong also believes that problemsencountered in the process of business growth cannot be attributed to a singleproblem of the financial system, financial and taxation system is also animportant factor restricting the development of enterprises. In his opinion,the first mission of China's financial reform is to update the concept to a newlevel, that is to carry out the reform of the revenue system along with thefinancial system, and the history will once again prove that the best era iscoming.
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