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CHEN Kewen：Exploring the Financial Solutions for the Development of Asian Real Industry
On November 3, 2020, the Third Session of International Conference on Industrial Finance of the Asian Financial Cooperation Association (AFCA) was successfully held in Shenyang, provincial capital of Liaoning, China. The conference was jointly sponsored by the AFCA and Shenyang Municipal government, and co-hosted by Shenyang Financial Development Bureau and Shenhe District government. CHEN Kewen, Secretary General of the AFCA, attended the conference and delivered a welcome speech on the topic of “Exploring the Financial Solutions for the Development of Asian Real Industry”.
The following is the original speech shared for readers’ reference.
Distinguished guests, ladies and gentlemen,
First of all, I would also like to extend my warmest welcome to all our participants of the Third Session of International Conference on Industrial Finance. Shenyang is the cradle of the old industrial base in Northeast China and the demonstration base of the new industrialization industry in China. Now, Shenyang is striving to build an important financial center in Northeast Asia. The industrial finance of Shenyang has a long history and great potential and broad prospects for the development will be created in the future. On behalf of AFCA, I would like to express my heartfelt thanks to the Shenyang Municipal government, Shenyang Financial Development Bureau and Shenhe District government for their strong support for the conference.
In recent years, with the systematic and integrated power, comprehensive service advantages and the ecological synergy effect of point, line, surface and the whole, industrial finance has effectively complied with the economic development trend and achieved rapid growth around the world. From the theoretical perspective, industrial finance is a financial mode of interaction and integration of finance and industry. On one hand, with the continuous development and upgrading of real industry, new demands and opportunities for financial innovation and cooperation are constantly put forward; on the other hand, financial instruments provide financing, resource integration and value-added services for the development of real industries by allocating resources and diversifying risk across time and space, so as to further accelerate the transformation and upgrading of traditional industries, and promote the breeding and development of emerging industries.
Judging from the specific practice, industrial finance is a complex system involving multi-dimensions, multi-levels and multi cycles. There are more or less differences in the scale, mode, duration, risk and other aspects of the financing demands of the subdivided industries such as automobile manufacturing, biopharmaceutical, electronic equipment etc., or the different production links in the upper, middle and lower reaches of the industrial chain, or the different stages of development cycles such as germination, growth, maturity and recession. Taken the world over, especially in Asia, the development path, policy support, structure and scale of industries vary with the characteristics of countries and regions, and the development stage, market structure and market openness of finance industries are also different, which makes the development mode of industrial finance present the characteristics of diversification and multi-levels, and increases complexity and uncertainty for international cooperation.
In this regard, AFCA has actively played its role as an international organization. Two years ago, AFCA set up the industrial finance cooperation committee and built the first international exchange and cooperation platform for its business lines. After two years of hard work, with the care and support of all parties, we have paid close attention to the issues faced by financial innovation and cooperation, actively responded to the demands of the development and reform of the real industry, and gradually carried out some fruitful work.
Under the background that new technologies such as Internet, Big Data and Artificial Intelligence are constantly being industrialized, and a new round of industrial transformation is brewing around the world, we established a research group together with relevant working teams of China Construction Bank in 2018 to review how finance played a key role in resource aggregation, technology transformation and industrial promotion in the previous industrial revolutions, studied and analyzed the unique law of a new round of technological change, and explored from a macro level that how to optimize resource combination, resource capitalization and value-added through financial innovation, so as to allocate funds to the industrial chain links with the highest efficiency such as technology transformation and application and industrial incubation development that are with thirsty demand of funds, boost a new round of industrial transformation and upgrading, and promote economic growth.
2019 is the first year after the establishment of the industrial finance cooperation committee. We found that with the breeding and rising of this round of industrial reform, emerging industries are not only in the ascendant, but also present the trend of clustering, which puts forward further requirements for financial innovation. In this regard, adhering to the underlying principle of problem-oriented, we held the training for special topic, conducted surveys at home and abroad, learned from international experience to analyze specific problems in different development stages, different industrial chain links, and different innovative development modes of emerging industrial clusters, explored and put forward corresponding, flexible and diversified financial service schemes. We selected Japan as the leading industrial finance sample, and organized some members of the industrial finance cooperation committee to go to Mizuho Bank, Sompo Japan Insurance Inc., Mitsui Sumitomo Fire Insurance and representative Japanese entity enterprises to experience the international frontier practice and explore the potential cooperation direction.
2020 is a special year. Affected by the COVID-19, the mode of online economy, telecommuting and intelligent production has becoming a major trend around the world and the industrial development tends to be digital, intelligent and networked. The scientific and technological enterprises with intellectual property as the core productivity have gradually become the key force of economic development. However, due to their small size, most of these enterprises are reported to have been suffering poor access to adequate finance sources. Focusing on this micro level “crux”, we together with relevant working teams of China Construction Bank, invited experts from policy-relevant, technological, academic and financial fields to conduct cross-border consultation. In addition, we analyzed representative cases together with relevant working teams of Agricultural Bank of China, based on the recognizing, understanding and grasping of the principle of technological innovation, the law of enterprise development and the essence of financial services, explored feasible financial innovation ideas in terms of enriching financial products, strengthening risk control, sharing information, and improving the intellectual property trading market, conducted pilot projects and tried the application in practice, so as to promote the value realization and the transformation efficiency of intellectual property.
In the process of exploration and promotion of these works, we have had strong support from related member units. The experts from these member units actively participated in our work and contributed valuable insights and experiences. At the same time, relevant government departments, policy-related and academic experts, as well as media friends gave us a lot of care and help and provided us with valuable opinions and suggestions. I would like to take this opportunity to express our heartfelt thanks for your assistance.
Currently, a new round of technological revolution and industrial reform are continuously being pushed forward, the layout adjustment of international production system is being accelerated, and the new economic cycle, industrial cycle and technology cycle are being mutually affected. Anti-globalization and protectionism, as well as COVID-19 pandemic have put great pressure on this trend, which also severely damaged the global production and supply chain in some countries, regions and sectors. This will restrict the speed and breadth of the transformation of advanced technology into actual production. However as Robert Schiller pointed out in his “Finance and Good Society”, finance is a powerful tool and the best way to help us achieve a better society. In the face of the new situation, we believe that the following aspects are needed to be more targeted in the future:
First, we should strengthen cooperation among financial industry. From the perspective of mainstream trends, industrial finance tends to take advantage of multiple market segments and tools to provide differentiated and accurate services for industrial development of different types and stages, among different countries and regions. In order to meet this requirement, we will continue to optimize the working mechanism, improve the workflow, mobilize and incentivize more banks, securities companies, insurance companies, funds, financial companies and other types of members from more countries and regions to get involved, promote multiple financing methods such as bank loans, equity, bonds, trust, financial leasing and others to cooperate, and make use of financial thinking and financial means to explore comprehensive solutions, so as to improve the integrity and coordination of the development of financial service industry.
Second, we should strengthen cross-border cooperation in finance, industry and technology. We realized that some financial practitioner lack sufficient understanding of the emerging new technologies, new industries and new formats, and then when making investment decisions they are prone to follow blindly and fall into herd behavior, or they are hesitant and miss opportunities. In this regard, we will bring into full play the initiative, wisdom and power of industrial finance cooperation committee as a platform, enrich communication channels, promote more in-depth docking and communication between financial entities and technology and industrial entities, break through the barriers of cross-border cognition, reduce the risk of information asymmetry, and push forward the construction of a symbiotic and win-win ecosystem. We can try to take the supply chain finance with typical scenarios as the breakthrough point, set up a special working group, focus on the difficult problems that need to be effectively solved by cross-agency, cross-industry and even cross-border cooperation, and discuss solutions together.
Thirdly, we should strengthen regional financial cooperation. Affected by the COVID-19 pandemic, some countries and regions tend to reduce the global distribution of industrial chain and transfer industries to specific countries or regions. Although this approach seems to us at most an expedient measure to deal with external shocks, to a certain extent in the future this trend will remain. Asia has a relatively complete industrial system, solid economic foundation and strong development potential and it is the preferred area for industrial chain aggregation, which will create more space for regional financial cooperation. AFCF will continue to give full play to the advantages of non-governmental organizations in inclusiveness and flexibility, strive to improve the quality of services, attract leading institutions in various financial subdivisions of Asian countries and regions to gather on our platform, innovate the channels and forms of regional financial cooperation, and provide stronger financial support for Asian and even international industrial restructuring.
Ladies and gentlemen, industrial finance is shouldering new responsibilities and new missions, but also facing new challenges and new topics. To meet the challenges with high quality and give full play to the responsibilities and missions entrusted by the times, it is necessary to lead new ideas, inspire new insights and practice new actions. Today, we are expecting all of you to share your viewpoints and work together for development, so as to pioneer ideas and contribute wisdom to the development and cooperation of industrial finance under the new situation.
I wish this conference a complete success. Thank you.