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注:本文发表于China Daily,2021年11月24日,转载请务必注明出处。原文名为Fairer Sharing of the Cake。

The 10th meeting of the Central Commission for Financial and Economic Affairs held on Aug 17 stressed promoting common prosperity through high-quality development as one of the most important goals for China after eliminating absolute poverty.

Since the launch of reform and opening-up in 1978, the development of the financial sector has promoted the savings-investment conversion and the allocation of capital and credit, thus becoming an important engine for China's rapid economic growth. It is conventionally believed that the development of the financial industry will benefit high-income groups, and worsen income distribution. However, in socialist countries, finance is expected to play a completely different role.

So, how should China achieve common prosperity through financial means? By giving full play to the redistribution effect of financial policies, vigorously promoting the innovation of financial instruments, and systematically enhancing the top-down design of innovative financial systems.

Some innovative financial instruments in the financial market can be used to significantly improve the efficiency of capital allocation and reduce transaction costs in order to realize common prosperity under the guidance of relevant policies.

Vigorously developing digital finance and inclusive finance can help. Compared with traditional finance, the combination of "digital finance and inclusive finance "possesses remarkable advantages, such as lowering the threshold for financial transactions, promoting information circulation and price discovery, and breaking through the "last mile" of financial services.

The development of digital finance and inclusive finance may help to achieve common prosperity. First, digital finance and inclusive finance can innovate the channels for savings, credit and payment, increase the accessibility to and availability of financial resources and facilitate payments by the public. Second, the "long tail market "covered by them involves a large number of low-income groups otherwise excluded from the formal financial system, which improves their return on assets and capital liquidity. Third, since digital finance and inclusive finance reduce information asymmetry, they can implement fund matching and credit monitoring more effectively, helping narrow the income gap. With the growing popularization of digital technology, the "digital divide" caused by unbalanced development between different regions and social groups is expected to gradually disappear.

In recent years, there has been a higher degree of coupling and significant spatial interdependence between green finance and economic growth. Green finance includes such instruments as green credit, green insurance, green bonds, green funds, green stock index, green trust and carbon finance, which can improve the efficiency of capital allocation in multiple ways and play a prominent role in rural revitalization. Green finance is an important support for agricultural supply side reform, helping agriculture adapt to climate change and achieve sustainable development. In rural areas, green finance can trigger rural enterprises' green transformation, improve their performance on business operation and environmental protection, and alleviate their financing constraints, thus increasing rural employment and farmers' incomes. Green finance can help farmers increase their income by revitalizing resources and seamlessly connecting traditional production methods with novel business forms.

China is confronting the underlying problems of a declining birth rate and accelerating aging. For a long time, the country has been relying on public finance to provide basic endowment insurance, and the sustainability of such situation faces a huge challenge. It is necessary to develop a pension finance system in a rapid, orderly and sustainable manner. Having long-term logical consistency with the social security system that regulates income redistribution, pension finance can facilitate the rational and orderly transfer of wealth between different generations and social groups. Marketization enables the relevant capital flow, through the financial system, to attain effective appreciation and rational distribution of social wealth, helping promote common prosperity.

In practice, on the one hand the financial system must be encouraged to lend full support to pension finance, coupled with fiscal and tax policies. On the other hand, its intended customers must be expanded, its service threshold lowered, and better play given to its inclusion and redistribution effects.

Sovereign wealth funds need to be actively developed. Sovereign wealth funds use the reserve assets of sovereign countries to make long-term diversified financial investments around the world. Their investment income can increase a country's overall national welfare and stimulate the inter-generational sustainable growth of its economy. Based on different purposes, different types of sovereign wealth funds have different mechanisms to alleviate wealth inequality. For example, the original intention of a stabilization fund is to increase a country's wealth through fund profits, prevent significant shocks to its economic growth after resource depletion, and achieve the purpose of inter-temporal national income smoothing. Similarly, the purpose of a pension reserve fund is to address the impact of aging, improve the pension insurance system and smooth national wealth. Strategic funds were created to meet the needs of national development strategies, enhance the competitiveness of domestic enterprises, and increase national wealth. With time, some stability funds and strategic funds established earlier have gradually shifted their function to smoothing wealth across generations under the impact of aging.

Actively developing funds focused on environment, social and governance themes can also help to achieve common prosperity. ESG theme funds mainly measure whether listed companies have a sense of social responsibility and potential for sustainable development. Statistics show that companies with a stronger sense of social responsibility usually have more stable stock prices and higher returns, and can better tackle a credibility crisis.

In moving toward high-quality development of China's economy, greater emphasis will be put on fairness and third distribution. Therefore, public charity and the concept of social responsibility represented by ESG funds are expected to become an accelerator for common prosperity. Listed companies willing to shoulder more social responsibilities will be trusted by more institutional investors in the capital market and be expected to win more policy-supported stimuli and preferences, which will undoubtedly help create a virtuous circle in promoting common prosperity. As a matter of fact, the popularity of ESG investment is also helping China to implement structural reforms such as green sustainable development, inter-generational sustainable development and financial inclusion.

 

Zhang Ming is deputy director of the Institute of Finance and Banking at the Chinese Academy of Social Sciences and deputy director of the National Institution for Finance and Development. Liu Yao is an assistant researcher at National Academy of Economic Strategy, CASS. 

 

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张明

张明

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中国社会科学院金融研究所副所长、国家金融与发展实验室副主任、研究员、博士生导师。曾任中国社会科学院世界经济与政治研究所国际金融研究室副主任、国际投资研究室主任;毕马威会计师事务所审计师、Asset Managers私募股权基金经理与平安证券首席经济学家。

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