2017 International Monetary Forum·Theme 1:Seminar on Cross-border Financial Cooperation under the Belt and Road Initiative and Inauguration of Cross Border Financial 50 Forum
2017-07-15 IMI
This seminar is jointly organized by IMI of Renmin University of China and Modern Bankers magazine, consisting of the inauguration of CBF50 and two roundtable discussions. The seminar is chaired by Li Zheping, Executive Director and Chief Editor of Modern Bankers.
Liu Yuanchun, Deputy President of Renmin University of China, delivers an opening speech on behalf of Renmin University of China. As a leader of the sponsored unit of CBF50, he pictures the background of the forum’s inception. He points out that as the Belt and Road Forum is being held and a series of cross-border financial policies have been introduced, the need for various forms of cross-border financial services in China’s financial market has also been rising. In this context, IMI of Renmin University of China and Modern Bankers jointly launch the establishment of CBF50 in order to fill the gap in the cross-border financial market and to strengthen global interaction. In recent years, we have made major reforms in the cross-border financial sector. For example, cross-border payments, currency exchanges, cross-border clearing services and other sub-areas. But at the same time he thinks that the development of cross-border finance won’t be smooth all the way. Developing a sound cross-border financial market is still a long way to go. Through a series of in-depth questions, he points out the right future direction for CBF50 and hopes that everyone should think and explore deeply when developing the cross-border financial field.
Cai Esheng, Former Deputy Chairman of CBRC and Chairman of FCSSC, delivers a keynote speech. Chairman Cai stresses that we cannot realize marketization overnight. In light of the development process, development path and the current economic situation, we need to look at the process of RMB Internationalization rationally from a global view. He holds that through RMB Internationalization and the Belt and Road strategy, we can truly realize “connectivity” and “Joint Discussion, Construction and Sharing” with the countries along the Silk Road and promote the infrastructure. Meanwhile, China, as the second largest economy, should give full play to the government departments and the private sector to promote the supply-side reform and structural adjustment, especially to accelerate the shift in driving forces for development.
The inauguration ceremony of CBF50 is the highlight of this seminar. CBF50, jointly established by Modern Bankers and IMI of Renmin University of China, is the first unofficial and non-profit academic organization. The forum focuses on policy research, theoretical research and practical innovation in cross-border finance, and promotes academic and practical exchanges between China and other countries. The forum is committed to holding frontline international symposiums, building cross-border financial and ecological systems, promoting international exchanges and cooperation and establishing a permanent high-end think tank for new financial innovation.
In the opening ceremony of the forum, Li Zheping, Executive Director and Chief Editor of Modern Bankers, mentions that “CBF50”is a product of the Belt and Road Initiative and the expanding cross-border financial market. The forum will carry forward financial innovation under the Belt and Road Initiative and improve related systems in response to President Xi Jinping's call of “opening the financial sector”. Through a series of academic activities, the forum can serve as a platform for members to fully communicate with each other and provide inexhaustible ideological power and technical sources for innovative development of cross-border finance.
Then, the first roundtable discussion starts. It is hosted by Zong Liang, Chief Research Fellow of Bank of China. The theme is “RMB Exchange Rate and Foreign Investment”.
Liu Jun, Executive Vice President of China Investment Corporation, thinks that RMB Internationalization is not just about the extension of currency function in general sense but more related to the currency’ s fundamental function based on its basic properties; that is, national interests. He emphasizes that the trend of globalization is irreversible and will continue to advance the human civilization. The global investment situation will experience a fundamental paradigm shift next. Hence, we must further study how to strengthen our national comprehensive strength.
Peng Wensheng, Global Chief Economist and Director of Research Institute of Everbright Securities, makes a detailed analysis from the relationship between exchange rates and foreign investment. He argues that foreign investment comes from a trade surplus, an increase in foreign investment in China and a decline in government reserves. Concerning the three funding sources of foreign investment, the external and internal investment might offset each other. The government’s foreign exchange reserves and the private sector’s foreign investment are possible to offset each other. He believes that the final increase in external investment will be reflected in China's net foreign assets. He stresses that increasing external net assets should be coordinated with improving productivity and internal economic structure in order to better control the uncertainty in exchange rates.
Herbert Poenisch, Former Senior Economist of BIS, compares the differences between RMB Internationalization and US dollar Internationalization. He points out that the paths for RMB and dollar are not exactly the same. At present, the pricing and payment in trade of the Belt and Road Initiative are still not carried out in Renminbi, so is the investment. And the US dollar has played a dominant part in the international financial field since World War II and has become a real reserve currency and pricing currency. Therefore, he suggests that in order to promote RMB internationalization, we should encourage the use of RMB in the overseas market by promoting the RMB cross-border payment system.
Tu Yonghong, Deputy Director of IMI, believes that changes in China's economic structure should be incorporated into RMB internationalization. With the upgrading and transformation of China's industry, the United States will become more independent on China’s trade, making the exchange rate and trade relations between China and the United States relatively stable. At the same time, China's international balance of payments has undergone important changes, changing from trade and investment surplus to trade surplus and net outflow of capital. This change makes the capital account an important means of balance between China and other countries and lays a foundation for maintaining the stability of the exchange rate to manage RMB when the international payment is in balance. In terms of foreign investment, Professor Tu stresses that direct investment and the introduction of foreign investment are significant to China's economic development. She believes that under the current economic situation, we must actively expand foreign investment and consolidate the economic base of RMB internationalization. We must also carry out capacity cooperation to speed up cutting the excessive capacity and destocking so as to optimize and upgrade China’s industry and create more resources. We need to learn the advanced technology and purchase good foreign brands through M&A. We should improve the aged service industry. We should also facilitate technological innovation and accelerate improving our weaknesses. We should formulate reasonable strategies for foreign investment and enable the direct investment to play a leveraging role in RMB Internationalization. Based on the domestic market, we need to expand the bilateral trade scale, promote RMB-denominated payments, stimulate the internationalization of financial institutions and provide comprehensive financial services for enterprises that have gone global.
Xiao Geng, Professor of the Business School and Public Policy School of Hong Kong University, holds that a stable exchange rate is the cornerstone of ensuring healthy and effective overseas investment and a link between the two pricing systems. According to the international status and development stage of RMB and dollar, China’s economy has a shorter history and still has a longer way to go. Maintaining a stable exchange rate can provide a frame of reference for China's structural adjustment. At the same time, Professor Xiao suggests that keeping the exchange rate fixed is of great significance to the risk management of the assets. A stable exchange rate enables the asset risk to be distributed in a more orderly way. If the exchange rate is liberalized too fast, it will bring significant short-term risks to China's foreign exchange reserves. Professor Xiao stresses that a fixed exchange rate is not contradictory to the market economy. The real market economy allows free cross-border capital flows. China should achieve the expected stability of the exchange rate through its characteristic macroeconomic regulation and control such as foreign exchange controls and fiscal policies.
The second roundtable discussion is hosted by Cao Tong, Chairman of Board of XFintech Corporation Limited and Former Vice President of Export-Import Bank of China. Its theme is “Currency and Financial Cooperation under the Belt and Road Initiative”.
Ding Jianping, Director of Research Center for Modern Finance, SHUFE, amends Wei Shangjin and Kawaii’s economic model. Ding puts the basic trade, GDP and market size into the model and analyzes the relationship between RMB and the Belt and Road Initiative from the academic point of view. He believes that the fundamental factor of RMB Internationalization is to enhance a country’s economic power, expand the market size, and explore the reasons why the market size is not consistent with the currency’s frame of reference. Meanwhile, we should notice that RMB Internationalization is not a key to all problems.
Guo Jianwei, President of Urumqi Central Sub-Branch of PBoC, thinks that due to the lack of infrastructure connectivity between our country and other countries along the Silk Road, China does not have many business dealings with neighboring countries. As a result, there is an urgent need for these countries along the Silk Road to increase their investment in infrastructure, particularly in railway construction. China has a strong comparative advantage in infrastructure construction and can rely on infrastructure construction and industrial park construction to promote the RMB output. At the same time, China has much opportunity to cooperate with these countries in trade. The Belt and Road Initiative and RMB Internationalization will help expand the scale of RMB-denominated settlements and greatly improve people’s welfare in neighboring countries. They can also help solve the problems like currency mismatch, maturity mismatch, structural mismatch and so on.
Juan Carlos Martinez Oliva, Senior Director of Directorate General for Economics, Statistics, and Research of Bank of Italy, highlights the importance of ADB. He believes that once the Asian investment bank is put into operation, its operation scale will continue to expand. It can motivate private sectors to get funds, strengthen market supervision and regulation, promote the development of the Silk Road, and thus becoming a very important driving force for RMB Internationalization. He argues that as RMB can be used more in the Asian region, including for investment, settlement and trade, which will, to a certain extent, contribute to the stability of the international financial system and the monetary system as a whole. He holds that the Belt and Road Initiative is not a tool for China to expand its influence on geopolitics. On the contrary, this strategy is conducive to regional solidarity and multilateral common development. Therefore, we need to establish a stable and reliable financial system and financial network, accept the international institutions’ supervision and achieve multilateral investment and trade. The Belt and Road Initiative will provide better opportunities both for China and even for the whole world. It will help each country realize modernization and globalization together and promote political stability and economic prosperity for the whole world. This initiative is in line with the interests of various countries.
Li Bingtao, Business Director of Everbright Securities and CEO of EBS International, proposes that the role of Hong Kong in international cooperation is positioned as a leader of civil diplomacy, a practitioner of strategies, a center of information exchanges, a controlling valve of country risk, a supplier of investment and credit enhancement, a distributor of asset allocation and a fair place for international arbitration. He puts forward his suggestions from the industry investment, service form, risk control, customer choice, geographical distribution to cooperation and exchanges. He stresses that by giving full play to the advantages of integrated management, brokers should seize the opportunity to cooperate, identify their own position and create a new core competence different from that of policy-based financial institutions, commercial banks, insurance institutions and other financial institutions.
Wang Yongli, Former Vice President of Bank of China, believes that the focus of the Belt and Road strategy is to promote RMB internationalization and emphasize equality, mutual benefit and win-win cooperation. He underlines that RMB internationalization does not lie in the cash level. Currency digitalization or even the electronic path is more important. We should adhere to liquidation basis of accounting. That is, we need to go global by doing accounts in the manner of creditors’ rights and debt through clearing houses like banks. We must seize the opportunity to speed up building a RMB-based global clearing system and a trading center as the core of the International Financial Center, encourage the construction of various types of financial trading centers, including the development and opening up of the bond market like government bonds and the interbank market, enhance financial trading pricing power and improve our influence.
Wei Benhua, Former Deputy Administrator-in-bureau of SAFE, proposes that the Belt and Road Initiative is in line with the trend of the times and is consistent with the current situation of the international economy. The use of funds will greatly boost the economic development so as to truly realize joint discussion, construction and sharing. He suggests that China should strengthen financial cooperation with the countries concerned and jointly issue bonds to provide more adequate financial support for the infrastructure construction of the countries along the Silk Road. He believes that the Belt and Road Initiative will shape the future of RMB Internationalization and financial cooperation. It accords with people’s aspirations and he is also full of confidence.
The Seminar on Cross-border Financial Cooperation under the Belt and Road Initiative and Inauguration of Cross Border Financial 50 Forum comes to an end. The seminar has brought together many Chinese and foreign leaders, experts and scholars from the financial sector, as well as those from the business community. They talk about their ideas and discuss with each other. Witnessed by those experts from the financial sector, the Cross Border Financial 50 Forum is officially founded. This financial event is undoubtedly important for promoting the Belt and Road Initiative and cross-border financial development and innovation.
