The Belt and Road EMBA Program for Southeast Asia at the PBC School of Finance (PBCSF), Tsinghua University held its fifth module in Beijing from Jan 10th to 14th. This module featured company visits and a series of lectures with distinguished scholars and experts, including Nobel Prize winner, Prof. Robert Merton and Zhu Min, dean of National Financial Research Institute of the Tsinghua University and others.
On the first day of the module, the B&R EMBA students visited Asia Infrastructure and Investment Bank (AIIB), TalkingData, a leading mobile data service platform in China and also China Cinda Asset Management Company, the first financial asset management company in China.
Sun Yuanjiang, senior communication officer of AIIB gave a profound introduction to AIIB’s history and mission and also discussed with students on how to motivate social investments in the construction along B&R countries. Cui Xiaobo, CEO of TalkingData and also student of the 6th class of EMBA program demonstrated on how to analyze different profiles of people using digital data. The B&R EMBA students also showed interests in helping TalkingData expanding into the Southeast Asia market. At Cinda, regional directors of the company’s Hong Kong, Southeast Asia and international department all came out receiving the students and shared thoughts on future cooperation and overseas business expansion.
Zhu Min delivered a lecture entitled “A New Challenging World” to the B&R EMBA students. He pointed out that we are now living in a world of hyper connectivity and capital flow is everywhere, so no country has truly independent macro policies but affected by others. He used the 2008 global financial crisis as an example to show the co-movements and spillover effects in the hyper connected world. The crisis which first started at Lehman Brothers, spilled over to the whole wall street, the US and the whole world.
Prof. Zhu also used different types of world maps measured by GDP and trade volumes to show that geographical size sometimes is not as important as economic capacity. He reminded the students that the global economy now is still in the “Low” picture, low growth, low inflation, low trade, low investments and low FDI, and this is going to remain for a while. On the other hand, rising populism and uncertain political risks should also be watched.
Li Daokui, director of the Center for China in the World Economy (CCWE), Tsinghua University talked on the risks and opportunities for China’s economy and also the global economy after the 19th CPC National Congress. In his view, there are mainly two reasons why the global economy now is bottoming up, one is the improvement of balance sheets as a result of asset price increase, the other is the increasing investment
brought by the high-tech bubble. He doesn’t think there is going to a financial crisis within 5 years, but still risks exist.
Prof. Li pointed out that while the US under the Trump presidency is shifting towards ethnic conservatism and anti-globalization, China is becoming the proponent of new globalization. China’s international strategy will be focused on managing Sino-US relationship, allying with Europe, making friends with neighboring countries and also the Belt and Road Initiative. In his view, the keynote of China’s financial policy is stability and financial risks should be closely watched in the next five years. The internationalization of RMB will be slowed down a bit under cross-border capital control.
Robert C. Merton, professor at the MIT Sloan School of Management, shared with the students his observations on the role of financial innovation and derivative markets in economic growth and development. Professor Merton received the Nobel Prize for his contributions in economics and known for his pioneering contributions to continuous-time finance, especially the first continuous-time option pricing model, the Black–Scholes formula.
He pointed out at the lecture that a well-functioning financial system is central for economic development in the Belt and Road Initiative. He went on to illustrate that financial innovation drives improvement of the financial system, and finance science, technology, and economic need drive financial innovation. For example, risk explosion in the 1970s drives an explosion of financial innovations in the US that were later adopted throughout the world, such as option exchange, financial value insurance, financial futures for currencies, interest rates, stocks, the first electronic stock market, NASDAQ and others.
Prof. Merton also argued that derivative contracts can efficiently redistribute risks to those who are better equipped to bear them, in a non-invasive and reversible fashion. He explained that so-called “interest rate swaps”, in which the bank swaps its fixed-rate assets with a counterparty that has floating rate assets, solved this problem that had plagued banks so long. Merton presented his research on the costs to Chinese investors of not being able to invest worldwide. He also proposed a financial product, “total return swap” to illustrates how financial innovation can solve a problem. Through this swap, Chinese pension funds increase their expected returns by diversifying their risks worldwide.
Ruan Zongze, executive vice president and senior fellow of China Institute of International Studies gave a speech on “Belt and Road Initiative and Chinese New Diplomacy”. He Maochun, director and professor at the Research Center of Economy and Diplomacy in Tsinghua University talked on the “New International and Domestic Situations” and also shared with the students his investigation tours along the whole course of the “Belt and Road”. Sheng Songcheng, counselor of People’s Bank of China (PBC) and former director general of PBC’s Survey and Statistics Department gave a lecture on “Balance Sheet of Central banks, Exchange Rate Stability and RMB Internationalization”. Ji Min, deputy head of the Research Bureau of PBC brought an in-depth analysis on China’s monetary policy for the EMBA students on the last day of the module.
