Jiang Jianqing: Global Finance in a Period of “Lost”

Caifu Magazine | by CAIFU Magazine


Jiang Jianqing, the former chairman of the Industrial and Commercial Bank of China, said he believes that the most competitive financial institutions in the future must be those adapting to change to meet the needs of the market, being innovative and constantly reforming, which is the key to staying alive. The future financier would be either tech-savvy financial experts, or finance-savvy tech experts, he added.

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At the Class of 2017 graduation commencement of the Shanghai Advanced Institute of Finance (SAIF) at Shanghai Jiaotong University on Sunday, July 9, Jianqing, the chairman of China-Central and Eastern Europe Fund, delivered a keynote speech on three topics: finance and life, finance and change, and finance and risk.

The current world financial industry is facing a triple impact from an economic cycle, an industrial cycle and a technological cycle. The development of it is in a period of "lost" strategically.

The financial industry in China today is much larger, wider and more complex. But it also has more challenges and more opportunities. Yet the uncertainty of choosing a career in the financial sector is greater than before as well. Not only we have nearly 5.7 million financial practitioners nationwide already, our university financial programs also show signs of "capacity excess." What I am talking about is the fact that after having experiencing decades of prosperity, China's financial industry has entered a stage of profound adjustment, facing challenges from both within the industry and with cross-industry institutions, and challenges of functionally "de-intermediation." Although the financial intermediary function is still in need and will not disappear, the intermediation institutions and job positions that only provide services in payment, financing, venture capital control and data processing might be replaced. Future finance may not be physical places, though the service itself remains indispensable.

The new generation of info-technology, represented by mobile connectivity, big data, cloud computing and artificial intelligence, is essentially a revolution about the transmission, reception, analysis and processing of financial information. Its evolution and innovation has changed the model, the business and the products of finance. It will further break the tempo-spatial constraints on financial transactions and services, bring about changes in customer preferences, service accessibilities, service standards and customer experiences, and bring about a chain of changes in business models, business philosophy and in financial culture.

The changes in the financial industry may happen faster than we can imagine. In financing, big data technology and artificial intelligence will enhance the level of risk control in the process of asset conversion. Credit operation is also a gaming process, which will move beyond traditional practices relying on experiences and trial and error, and adopt deep learning technology to accumulate experiences and simulate our brain mechanism in credit decision-making. The precision and accuracy of risk management will achieve qualitative improvement. The blockchain technology will have its role in payment and other areas to enhance security. Virtual reality technology will show its promises in the field of credit investigation and other areas, while non-structural image data could provide immersive experiences remotely for decision makers. Intelligent investment will improve management of assets and private banking. And remote mobile communication technology will subvert the traditional banking business model.

The most competitive financial institutions in the future must be those adapting to change to meet the needs of the market, be innovative and constantly reforming, which is the key to staying alive. The future financier would be either tech-savvy financial experts, or finance-savvy tech experts.
The only consistency in the financial industry is risk control. Modern economy is an economy of credit, and the credit relationship is everywhere. The scope of the credit is expanding and its structure is becoming more and more sophisticated on a daily basis. With the financial market keeps expanding and deepening, its product system becomes more and more complicated. While the degree of financial openness is widening, the risk is increasing. Risk management is the core of financing, since the whole financial industry is built through risk identification, monitoring, disposal and management to create value and achieve its stable and healthy development, and ultimately promote social progress.

Finance drives prosperity, but it also leads to crisis. During the decades of reform and opening up, the progress of China's financial industry is obvious for all to see, but also has experienced some severe financial risks. This industry is an institution of risk and is inherently vulnerable. Although the risks are related to the unpredictable drastic changes in the market environment, which is incidental and accidental, the culprit for risks are always the excessive expansion and blind innovation, neglecting basic laws of economics and ignoring basic risk prevention. The financial industry is an industry of balance, and the asset-liability balance sheet is the T-account. All financial managers must balance the relationship between income and risk, between long term and short term, and between scope, speed and quality. They should not overpursue short-term interest. Entrusted by the depositors, financiers bear huge responsibilities, and should be especially prudent.

People engaged in financial professions may all call themselves financiers or bankers. But due to the particularity of the financial industry, the complexity of its structure, and the hysteresis nature of the risks, financiers need to undergo the test of risk and time. In the financial industry, the survivor is king. It lies in the industry's heritage for financiers to be moderate or even conservative. I have repeatedly reiterated that in the financiers’ club, we do not value sprinters, but the marathon champion.