Annual Meeting of the New Champions 2012

  • Financing the Future Economy

    By Heather Ma

    Wednesday 12th September 2012 - 10:30am - 11:30am

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    • Backdrop problem: Missing links between fund and market.

      900 million without water/electricity, 70% without mobile phones, US$ 700 billion needed in infrastructure investment but there has not been enough action, even though the saving rate in Asia is 37%.
    • Key issues are multifold

      , including lack of trust between private and public sector; long-termism mentality; information transparency; innovative investment products; and SME financing
    • The solution has to be a holistic approach

      , involving financial sectors, governments, and markets. Together they should achieve investment platform reforms and innovation in investment product portfolio.

    The panel addressed the question of how to finance growth, including investment in infrastructure needed to bring the quality of living standards to many emerging economies during the huge global deleveraging post-financial crisis.

    The formation of the panel is diverse. Its distinguished pursuits form a complete package of proposals to respond to the questions raised. The governmental officers are looking for trust and confidence from leaders and at the same time structuring alternative financing sources.

    The foreign investors are looking for improvement in public sector transparency, the credit-rating system and innovation in financing products.

    The small and medium enterprises (SME) hope to see more public-private bonds, ex: PPP (public-private partnership), PFI (private financing initiatives). Also, to involve more SME, the rating system should shift the focus on the company itself to the project as a whole. 

    To dig further into detail, a holistic approach is necessary to address the issue, including improvement in corporate disclosure, innovation in product offerings, and increased role of governments to support these initiatives.

    First, improving transparency and corporate disclosure is a key factor in increasing investor and lender confidence in creating a deeper, liquid equity market. A point was made that Chinese regulators may need to shift from the traditional paternalistic approach where the government is expected to take responsibility for corporate failures, to an information disclosure-oriented approach.

    Second, a revisit in the risk-weighting rules of loans to SMEs with regards to bank capital requirements would contribute to enhancing credit to this sector. Currently SME loans are considered high-risk assets, which deter holding these loans. This may not necessarily reflect the true economic credit of these companies. The voices of practitioners should be aired in order to influence the regulatory rule-making process.

    Third, deeper engagement of the private sector in public projects may help not only to increase capital deployment in social infrastructure building but also improve the quality of the projects. Innovation in packaging these projects as a financial product may also be considered to suit the needs of various investors. As an example, securitization of PPP portfolio would help to provide investors with the liquidity they need.

    Fourth, government and multilateral agencies such as MIGA can play a role in providing guarantees to projects and thus enhance credit.

    Disclosure


    These insights were written by Heather Ma. The views expressed are those of certain participants in the discussion and do not necessarily reflect the views of all participants or of the World Economic Forum.

Session objectives

How can barriers to domestic and cross-border financing be overcome in the future economy?

  • Reconnecting the financial system to real economy 
  • Injecting a long-term mindset into investment decisions 
  • Balancing stability with access to finance

Rapporteur

  • Heather Ma Heather Ma
    Founder, S Value Design, Taiwan, China

    Market Development Manager, Dadi Early Education Group, a leading brand in early education and kinde...

Speakers

  • John Zhao John Zhao
    Founder and Chief Executive Officer, Hony Capital, People's Republic of China

    BSc in Physics, Nanjing University; MBA, Kellogg School of Management, Northwestern University; dual...

  • Wei Sun Christianson Wei Sun Christianson
    Co-Chief Executive Officer, Asia-Pacific and Member of the Management Committee, Morgan Stanley, People's Republic of China

    Graduate, Amherst College, Massachusetts; 1989, JD, Columbia University. Formerly: Lawyer, Orrick, H...

  • Victor L. L. Chu Victor L. L. Chu
    Chairman and Chief Executive Officer, First Eastern Investment Group, Hong Kong SAR

    LLB (Hons), University College, London. Since 1982, Solicitor, Hong Kong; 1988-91, Director and Coun...

  • Valdis Dombrovskis Valdis Dombrovskis

  • Heather Ma Heather Ma
    Founder, S Value Design, Taiwan, China

    Market Development Manager, Dadi Early Education Group, a leading brand in early education and kinde...

  • Mohamed Najib Boulif Mohamed Najib Boulif

Moderated by

  • Kevin Lu Kevin Lu
    Distinguished Fellow, INSEAD, Singapore

    Formerly: with World Bank Group, including CFO and Regional Director, Asia-Pacific, and Member, Seni...

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