Jack Ma, the Chinese billionaire behind Alibaba Group Holding Ltd., pointed out the lack of a healthy financial system in China and urged the reform of financial regulations in a speech Saturday.
Ma made the remarks at the second Bund Finance Summit in Shanghai, an event attended by hundreds of bankers and regulators.
In his observations, unlike Europe, where the financial system has been operating for decades, China is not facing a financial systemic risk, but a risk that “still lacks a healthy financial system.”
He also questioned whether Basel Accords are suitable for China. “Europe needs the Basel Agreement to solve the over-complex and aging system problems, but China’s financial industry is still in its youth without a mature ecosystem.”
After speaking for awhile, Ma mentioned the dual listing for Chinese fintech giant Ant Group. “It’s the first time that the pricing of such a big listing – the largest in human history – has been determined outside New York City.”
He said the share price had been decided on Friday but did not disclose the figure, and Ant’s offering was a “miracle.”
“We didn’t dare to think about it five years ago, or even three years ago. But a miracle just occurred.”
Ma also said China’s financial system needs other technology-driven channels in a vast economic system as it’s still dominated by state banks.
“Big banks are like big rivers and aortas of blood, but we also need lakes, ponds, and creeks.”
Ma said the conventional banking business in China is similar to pawn shops as they both demand collateral and guarantees before lending.
“The system of relying on assets and mortgages will go to two extremes,” Ma said. “The concept of pawnshops is the most serious in China. Either enterprises’ assets are fully pledged and they take huge pressure, or they unscrupulously borrow money and continuously increase leverage, causing huge debts.”
He said the pawnshop mentality cannot support the financial needs of the world’s development in the next 30 years. And people must use today’s technology to replace the pawnshop mentality with a credit system based on big data.
“In the future, it would need an inclusive, sustainable and green system that uses new technologies such as big data, cloud computing as well as blockchain.”
Ma also said there are too many controls in the financial regulations.
“Today, there are too many documents that don’t allow you to do something but too few supportive policies coming out. I am most afraid that after such supervision, risks disappear and relative department risks disappear, but the entire economy is at risk of not developing.”
“Innovation always comes with risks and mistakes … the biggest risk is that you try to minimize the risk to zero,” Ma said.
“Good innovations are not afraid of supervision, but they fear outdated supervision. We cannot manage the airport the same way as the railway station, and we cannot manage the future with the same approach we used yesterday.”
He also cited digital currency as an example, saying it may be an important core in the future world financial system. “Today’s financial market does not need digital currency, but it needs it tomorrow, the future needs it, and thousands of people need it. We should ask ourselves, what practical problem does digital currency solve in the future?”
“Reform requires sacrifice, and there is a price to pay,” Ma said. “When our generation makes this reform, the result may only be seen by the next generation. We may be the one who is going forward with heavy burdens, but this is the opportunity and responsibility given to us by history,” he said.