Fi­nanc­ing the real econ­omy

China Daily (Hong Kong) - - COMMENT - — PEO­PLE’S DAILY

That the evo­lu­tion of the sup­ply side lags be­hind that of the de­mand side is the hard nut to crack for China’s econ­omy to de­velop in a healthy man­ner. This is true for the fi­nan­cial in­dus­try, which is sup­posed to pro­vide fi­nan­cial ser­vice to the real econ­omy in an ef­fi­cient man­ner, as the week­end Na­tional Fi­nan­cial Work Con­fer­ence has noted. How­ever, it has long been dif­fi­cult for small and medium-sized en­ter­prises to get funds from fi­nan­cial in­sti­tu­tions.

When it comes to pro­vid­ing loans or other fi­nan­cial ser­vices, fi­nan­cial in­sti­tu­tions need to work out ways to make sure their loans go to where the money is re­ally needed and where the money will make a dif­fer­ence to the pro­duc­tion of needed prod­ucts.

They should aban­don the fan­tasy that their old profit model, which is largely based on the State-con­trolled dif­fer­ences in de­posit and loan in­ter­est rates, can be sus­tained.

Given the slower eco­nomic growth that is the new nor­mal for China’s econ­omy, it is ir­ra­tional and ir­re­spon­si­ble for the banks to make prof­its by us­ing their money in the form of fi­nan­cial de­riv­a­tives that cir­cu­late within ar­eas far away from the real econ­omy.

The need to re­struc­ture the fi­nan­cial in­dus­try is no less ur­gent than up­grad­ing the real econ­omy. The fi­nan­cial in­sti­tu­tions should form a multi-layer fi­nan­cial sys­tem that boasts com­pre­hen­sive fi­nanc­ing func­tions, with ef­fec­tive su­per­vi­sion over fi­nan­cial risks and pro­tec­tion of in­vestors’ le­gal rights and in­ter­ests.

The days when the fi­nan­cial in­sti­tu­tions could profit from the toil of oth­ers no longer ex­ist. Now their prof­its will de­pend on how well they serve their cus­tomers, and how at­trac­tive their ser­vices and prod­ucts are com­pared with those of their com­peti­tors.

The State-owned large banks as well as small and medium-sized banks and pri­vate fi­nanc­ing agen­cies must ex­pe­dite their strate­gic tran­si­tion, with a view to im­prov­ing the qual­ity of their ser­vices and ef­fi­ciency.

All fi­nan­cial in­sti­tu­tions should speed up the trans­for­ma­tion of their busi­ness mod­els to re­duce the cost of fi­nanc­ing the real econ­omy and cre­ate value in the ser­vice of eco­nomic and so­cial devel­op­ment.

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