The New Cycle and New Finance in China

Preface
Contents
Part I Macro Economy and Financial System
1 Has China’s Economy Reached a Turning Point?
1.1 China’s Economy Itself is Still Clearing up
1.2 Unclear Global Economic Cycle
1.3 New Cycle and the Third Path Beyond Hard Landing
2 On China’s Economy and Financial Industry
2.1 A New Stage: New Features in Economic Cycle and Structure
2.2 Transformation of the Financial Industry
2.3 New Driving Force of China’s Economic Growth
3 On Monetary Stimulus and China Economy’s Deep Structural Contradiction
3.1 Reasons and Future Trend of Renminbi Exchange Rate Fluctuation
3.2 Regulatory Authorities’ Attitude Toward the Trend of Renminbi Exchange Rate
3.3 Impact of Renminbi’s Inclusion into SDR on Renminbi Exchange Rates and Related Products
4 Origin and Trend of Financial Deleveraging
4.1 Background of Financial Leverage
4.2 Changes in Market Operation After Financial Deleveraging
4.3 Financial Deleveraging: Impact and Countermeasures
5 A More Realistic Policy Orientation: Stabilizing the Slope of Rising Leverage Ratio
5.1 Characteristics of China’s Macroleverage Ratio
5.2 Deleveraging or Stabilizing Leverage
5.3 Measures to Stabilize Leverage Ratio
6 On Financial Reform and the New Normal
6.1 Economic New Normal and Financial New Normal
6.2 New Trend of Financial Reform Under the New Normal
Part II Financial Institutions
7 On the Development Prospect of China’s Banking Industry
7.1 Generally Healthy Fundamentals of China’s Banking Industry
7.2 Credit Structure and Non-Performing Loans of China’s Banking Industry
7.3 Risk Control Capability and Disposal Tools of China’s Banking Industry
7.4 Financial Services Provided by Banks
8 On Commercial Banks and Economic Transformation
9 China’s Banking Industry in Globalization 3.0
9.1 Financial Technology Forces Banking Industry to Make Changes
9.2 Transformation of Profit Models
9.3 Three Development Trends
9.4 Development Prospect of the Banking Industry in 2017
10 Upgrade of China’s Outsourcing Business
11 Net Interest Margin of Commercial Banks at Home and Abroad
11.1 Interest Spread Between Deposits and Loans and Net Interest Spread
11.2 Factors Influencing Interest Rate Spread
11.3 Four Regression Methods for the Study of Factors Affecting Interest Spread
12 Transformation of Commercial Banks Under the New Normal
12.1 Changing External Environment of China’s Banking Industry
12.2 Transformation of Commercial Banks with Declining Profits
12.3 Evaluation of the Banking Industry’s Transformation
13 Retail Banking and Transformation and Development of Commercial Banks
13.1 Retail Banking: Status Quo, Opportunities and Challenges
13.2 Retail Banking: Key Development Direction of Commercial Banks
References
14 Future of Direct Banks
14.1 Key to the Development of Direct Banks
14.2 Policy Suggestions for China’s Direct Banks
References
15 Risks of Bank Financing
15.1 Status Quo of Commercial Banks’ Financial Management
15.2 Possible Local Risks in Financial Management Business of Commercial Banks and Their Causes
15.3 Development Trend of Bank Financial Management
References
16 On Cash Loan Business
16.1 Controversy Over Payday Loan
16.2 US and UK’s Regulation on Payday Loan and Its Influence
16.3 Status Quo of Cash Loan in China
16.4 Implications and Suggestions
17 On Development of Bank Financing
17.1 Origin of Bank Financing Business
17.2 Logic Behind the Development of Off Balance Sheet Financing
17.2.1 Regulatory Arbitrage: On Balance Sheet Assets Moves into off Balance Sheet
17.2.2 Income Driven: Emergence of Large Asset Allocation
17.3 Behind the Explosive Expansion: Prominent Macroliquidity Risks
17.3.1 Improve the Income Structure of Banks and Enhance Their Light Operation Level
17.3.2 Strengthen the Development of Asset Management Industry
17.3.3 From Asset Shortage to Capital Shortage and Its Influence on Liquidity
17.4 Development Direction of Bank Financial Management
18 New Third Board: Development Trend and Risk Management
18.1 Rapid Development of New Third Board
18.2 Management of the Investment Risks of the New Third Board
References
19 Rigid Payment and Reshuffle of the Asset Management Industry
19.1 How Rigid Payment Came into Being
19.2 Rigid Payment Distorts the Ecological Environment of China’s Asset Management Industry
19.3 Rigid Payment is Being Broken
19.4 Changes in Asset Management Industry After Breaking Rigid Payment
20 Core Competitiveness of Asset Management Industry
21 On the Trend of Financial Structure Reform
21.1 Expanding Coverage of Asset Management
21.2 Value Chain of Asset Management Industry
21.3 Development Trend of Global Asset Management Industry
21.4 Development of Asset Management Industry in China
22 Overseas Allocation of China’s Insurance Asset Management
22.1 Status Quo of Insurance Asset Management Industry
22.2 Regulatory Provisions on Overseas Asset Allocation
22.3 Trend of Overseas Asset Allocation
23 On Treatment Level of China’s Basic Endowment Insurance System
23.1 Introduction
23.2 A Comparison of Systems
23.3 Model Setting
23.4 Pension Replacement Rate and Relative Level Model of Urban Employees
23.5 Pension Replacement Rate and Relative Level Model of Urban and Rural Residents
23.6 Parameter Hypothesis
23.7 Results of the Calculation of the Treatment Level
23.8 Sensitivity Analysis
23.9 Retirement Age
23.10 Return on Investment
23.11 Treatment Growth Mechanism
23.12 Conclusion and Policy Suggestions
References
24 On Loan Guarantee Insurance of Micro and Small Enterprises in China
24.1 Overview of Loan Guarantee Insurance and Current Pilot Project
24.1.1 Overview of Loan Guarantee Insurance
24.1.2 Pilot Projects of Loan Guarantee Insurance
24.2 Literature Review
24.3 Significance of Loan Guarantee Insurance
24.4 Operation and Risk Control of Loan Guarantee Insurance
24.4.1 Operation of Loan Guarantee Insurance for Small and Micro Enterprises
24.4.2 Risk Control of Loan Guarantee Insurance for Small and Micro Enterprises
24.5 A Theoretical Analysis of Relaxing Financing Constraints on Loan Guarantee Insurance of Small and Micro enterprises—A Game Model
24.6 Problems in the Development of Loan Guarantee Insurance
24.6.1 Imperfect Credit Environment
24.6.2 Loopholes in Operation and Lack of Professional Talents
24.6.3 Small Pilot Scale
24.6.4 Lack of Government Support
24.7 Suggestions on Perfecting Loan Guarantee Insurance
24.7.1 Strengthen Internal Control System
24.7.2 Strengthen Professional Personnel Training
24.7.3 Strengthen Product Innovation and Optimize Resource Allocation
24.7.4 Increase Government Support
References
Part III Payment-Clearing Sector
25 Online Payment in China at Present: Impetus, Risk Assessment and Supervision
25.1 Four Driving Forces for Development of Online Payment
25.2 Assessment of Status Quo of Online Payment Safety
25.3 Current Safety Status of the Whole Sector of Online Payment in China
25.3.1 Balance Between Safety and Efficiency of Online Payment
25.3.2 Relationship of Competition and Cooperation Among Major Online Payment Service Providers
25.3.3 Policy Framework Facilitating Benign Interaction of Innovation and Regulation
25.4 A Look into Online Payment Safety from Perspective of Online Payment Agencies
25.4.1 Safety Risk of Online Payment in China Kept Under Control, with the Safety State Being Stabilized and in Good Prospect
25.4.2 Major Risks Facing Online Payment Agencies in China
25.4.3 Supervision of Online Payment Safety in China
25.5 Trend of Online Payment Risk Management in China
25.5.1 Attention Should Be Paid to Dynamics of Online Payment Category
25.5.2 Attention Should Be Paid to Great Influence of User Experience on Online Payment Safety
25.5.3 Two Important Principles to Follow in Establishing Online Payment Risk Management System
25.5.4 Adherence to Notion of Innovation-Driven Development
26 Prospective Changes in Third-Party Payment in China with Emergence of NetsUnion Clearing Corporation (NUCC)
26.1 Third-Party Payment Market: An Increasingly Competitive Market Featuring Co-Existence of Competitive Businesses
26.1.1 Market for Bank Card Acquiring Service: Bank Card-Based Transaction Remains Steady yet with a Slowing Growth
26.1.2 Online Payment: Online Payment Sees Rapid Growth, with Mobile Payment Playing the Leading Role
26.2 Expectation on NetsUnion Clearing Corporation (NUCC): What is the Supervision Authorities’ Concern of About Payment Service?
26.2.1 Potential Supervision Loopholes in Third-Party Payment Based on Direct-Link Operation
26.2.2 NetsUnion Clearing Corporation (NUCC) is Established to Close Supervision Loopholes and Help Third-Party Payment Return to Essence of Online Payment Service
26.3 Influence of NUCC on Third-Party Payment Market
References
27 Development of Payment-Clearing Sector in Financial Reform of China
References
Part IV Inclusive Finance
28 Technological Innovation of Inclusive Finance and Its Path of Development in “New Normal” of China’s Economy
28.1 Technological Innovation of Inclusive Finance
28.2 Seeking New Path of Development for Inclusive Finance in “New Normal” of China’s Economy
29 Path of Development and Innovation of Small and Microbusiness-Targeted Finance During Economic Adjustment
29.1 Business Models of Microfinance Facing Pressure Test During Economic Adjustment Cycle
29.1.1 Three Business Models of Microfinance
29.1.2 Business Models of Microfinance Under Test During Economic Adjustment Cycle
29.2 Exploration on Innovation of Microfinance in New Economic Situation
29.3 Development Trend of Microfinance in China
29.3.1 Microfinance Remains Important Field for Further Development of Banking Industry
29.3.2 Reliability of Big Data-Based Credit Investigation and Online Loan Service in Internet Finance to Be Tested
29.3.3 Vertical Management to Become Solution to Microfinance Problems
29.3.4 Comprehensive Application of Financial Tools to Become Important Field for In-Depth Development of Microfinance
30 Influence of Aging Population on China’s Financial System
30.1 Faster Pace of Population Aging
30.2 Shorter Intervals Between Turning Points of Demographic Structure
30.3 Heavier Burden of Aging Population
30.4 Influence of Pension Finance on Development of Financial Industry
31 Path to Sustainable Development for Small Loan Companies
31.1 Small Loan Companies Face Development Bottleneck
31.1.1 Number of Small Loan Companies and Employees Shows Steady Downturn
31.1.2 Proportion of Small Loan Companies’ Loan Balance in Financial Institutions’ Total Loan Balance Declines Continuously
31.1.3 Small Loan Companies See Big Drop in Revenue and Profit on Average
31.2 Development of Some Small Loan Companies Subject to Multiple Constraints
31.2.1 Constraints of Financing Channels
31.2.2 Ways for Small Loan Companies to Replace Private Usury
31.2.3 Risk Control System of Some Small Loan Companies is Relatively Weak
31.2.4 Competition in the Sector Intensifies
31.3 Ways for Small Loan Companies to Lift Constraints on Sustainable Development
31.3.1 Concentration on Inclusive Finance as Prerequisite for Sustainable Development
31.3.2 Multiple Channels of Financing as Critical Drive for Development
31.3.3 Establishment of Business Model and Risk Control System with Special Features as Important Safeguard Measure
References
32 Green Finance: Challenges and Opportunities
32.1 Background, Opportunities and Challenges
32.2 Necessity of Developing Green Finance
32.3 Status Quo of Green Finance and the Existing Problems
32.4 Suggestions on Policy Making
References
Part V Urbanization
33 What is the Way Out for China’s Reform in Rural Land System?
33.1 Background: Why is Land Reform Imperative?
33.2 Ways of Reform: Marketization as the Main Approach to Land Reform
33.2.1 Marketization
33.2.2 Profit Distribution
33.2.3 Classified Management
33.3 Influence of the Reform: Exploration of New Land Dividend
34 “3+6” Pattern of Development in China’s Urbanization Campaign
34.1 Shenzhen is Characterized by the Highest Circulation Rate of Second-Hand Housing in China
34.2 The Leasing Market Will See the Fastest Growth in Ten Years to Come
35 Central Issues in Reform of Urbanization Financing
35.1 Critical Issues of Reform and Methods of Coordination
35.2 Framework, Priority Setting and Breakthrough Points of Reform
36 Approaches to the Development of PPP with Chinese Characteristics
37 On How to Securitize Assets of PPP Projects
37.1 What is “PPP”?
37.2 Specific Forms of PPP Project Financing
37.3 Advantages of PPP Projects
37.4 Applicability of Asset Securitization to PPP Projects
37.5 Supporting Policies and Relevant Laws and Regulations
References
38 Four New Trends of Innovation in Financing Models
39 Trends of Innovation in Financing for Small- and Medium-Sized Enterprises
Part VI Financial Supervision
40 China's Implementation of Basel III: Progress and Solutions
40.1 The Status Quo of China’s Banking Sector
40.2 Implementation Problems in China’s Banking Sector
40.3 Suggestions on the Implementation of Basel III in China’s Banking Sector
40.3.1 Utilizing Innovative Capital Instruments to Achieve the Differentiation Between Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital
40.3.2 Objectively Assessing the Impact of Regulatory Indicators System Adjustments
40.3.3 Putting the Awareness of Risk Management into the Banking Business Activities and Continuously Improving the Banking Risk Management Capability
41 How to Address the Gray Rhino Risk of Local Government Debt
41.1 The Current Situation of Local Government Debt
41.2 The Causes of Local Government Debt
41.2.1 A High Degree of Mismatch Between Administrative and Fiscal Powers Among Governments at All Levels After the Revenue-Sharing System Reform
41.2.2 Improper View on Political Achievements
41.2.3 Unsound Local Financial System
41.3 In the Long Run, the Ways to Forestall and Defuse Local Government Debt Risk
41.3.1 Establishing an Early Warning Mechanism for Government Debt Risk
41.3.2 Strengthening the Constraint Mechanism for Local Government Debt
41.3.3 Strengthening Local Government Debt Accountability System, and Reducing the Negative Effects of Soft Budget Constraints
References
42 How Supervision Drives the Transformation of Bank Outsourcing Business
42.1 With Strengthened Supervision, the Scale of Bank Outsourcing Business Tends to Decline
42.1.1 Supervision Over Bank Outsourcing Business Has Been Significantly Strengthened
42.1.2 The Decline of Bank Outsourcing Investment Scale Has a Direct Impact on Both the Stock and Bond Markets
42.2 The Past and Present of Bank Outsourcing Business
42.3 Why the New Regulations Target Bank Outsourcing Business
42.4 Under the Guidance of Strengthened Supervision, Bank Outsourcing Business Presents a New Development Trend
42.4.1 With the Deepening of Financial Deleveraging, the Growth of Outsourcing Business Will Return to a Reasonable Level
42.4.2 Improve Dynamic Management of Entrusted Institutions and Shift from Channel to Problem-Solving Type
42.4.3 Actively Explore Ways to Establish an Off-Balance Sheet Management System
References
43 Global Systemically Important Banks: Emphasis on Higher Loss Absorbency
43.1 Introduction
43.2 An Overview of the Literature
43.3 Assessment Methodology for and Identification of G-SIBs
43.4 Total Loss-Absorbing Capacity (TLAC)
43.4.1 Minimum External TLAC Requirement
43.4.2 Internal TLAC Requirements
43.4.3 Eligible TLAC
43.5 Assessment and Impact of Higher Loss-Absorbing Capacity
43.5.1 The Basel III Capital Components
43.5.2 Assessment of Loss-Absorbing Capacity of Capital Instruments
43.5.3 Consequences of Failing to Meet Capital Surcharge Requirements
43.6 Policy Recommendations
43.6.1 Assessment on Impact of Higher Loss-Absorbing Capacity on China’s Banking Sector
43.6.2 Push Forward the Priorities of Implementing the Regulatory Reforms of G-SIBs
References
44 On Financial Regulatory System Reforms from the Perspective of Financial Structure
44.1 Financial Structure Determines the System and Structure of Financial Supervision
44.2 The Global Financial Structure Trend Has not Changed After the Outbreak of the Financial Crisis
44.2.1 Analyze the Changing Trend of the Global Financial Structure from the Perspective of Financial Regulatory Policies
44.2.2 Observe the Global Financial Structure Changing Trend in Terms of Financial Structure Indicators
44.2.3 On the Development Trend of the Global Financial Structure from the Change in American Financial Structure
44.3 After the Financial Crisis, Global Financial Supervision Has Shown a Trend Away from Multi-Institutional Separate Supervision and toward Unified Functional Supervision or Objective Supervision
44.3.1 After the Financial Crisis, the US Financial Regulatory System Has Taken a Further Step toward Unified Functional Supervision
44.3.2 After the Financial Crisis, the UK Established a Quasi-Twin-Peak Model Led by the Central Bank Based on Objective Supervision
44.3.3 After the Financial Crisis, Russia Ended Its Multi-Institutional Financial Regulatory Model
44.4 Referential Significance for the Reform of China’s Financial Regulatory System
References
45 An Objective Assessment of the Current “Shadow Banking System” from the Perspective of Financial Structure Evolution
45.1 Connotations and Features of Shadow Banking System
45.2 Shadow Banking System in China is Different in Nature from Shadow Banking System in Europe and the United States
45.3 The Role of China’s Shadow Banking System in Improving Financing Structure and Promoting Economic Transformation
45.4 Phase Out the Shadow Banking System and Implement Differentiated Supervision from the Perspective of Preventing Systemic Risks