Beijing, 3 Mar (ZXS) -- Starting from the "flash crash" of Silicon Valley banks, the banking industry in the United States and Europe has recently suffered successive shocks, and many institutions have fallen into turmoil. A number of Chinese financial figures reminded when attending the 18 annual meeting of the Global Wealth Management Forum in Beijing on the 18th that the international financial market is becoming more volatile and fragile, and the spillover effect of the Fed's interest rate hike and its impact on the global financial system deserves great attention.
Xuan Changneng, vice governor of People's Bank of China, said that the recent risks exposed by individual banking institutions in the United States and Europe show that the rapid adjustment of monetary policy in major developed economies has spillover effects as well as internal spillover effects.
He pointed out that in the past, the long-term low interest rate environment made some financial institutions accustomed to manipulating assets and liabilities in a low interest rate volatility environment, and lacked the expectation and sensitivity to short-term and large fluctuations in interest rates. The balance sheet characteristics of Silicon Valley banks make them more sensitive to changes in interest rates and ultimately pose risk.
As he said, because Silicon Valley banking is concentrated in areas such as technology and venture capital, it relies less on individual depositors than traditional banks. The Fed's aggressive interest rate hikes have led to a fall in bond prices, a rapid loss of deposits in commercial banks, and an increase in financing costs. Against this backdrop, Silicon Valley banks are not prepared for a liquidity crisis.
It is important to be aware that such risk events may not be accidental.
Ju Weimin, vice chairman, general manager and chief investment officer of China Investment Corporation, China's sovereign wealth fund, said that the global macro situation has undergone a paradigm shift, and the era of low inflation, low interest rates and stable growth in the past 20 years has gradually drifted away, and high inflation, high interest rates and low growth have become new characteristics. Liquidity has entered a tightening cycle, superimposed on the impact of geopolitical risks, the international financial market has been subjected to multiple shocks of cyclical adjustment and structural changes, and some financial business models are facing great challenges.
Ju Weimin further pointed out that last year's UK pension collateral crisis and the recent bankruptcy of Silicon Valley Bank were directly caused by the mismatch of asset and liability terms and misallocation of liquidity, and the root cause was that the original business model was obviously not adaptable to the new paradigm. Moreover, similar risk events may occur later.
How can China prevent these risks? Lou Jiwei, Chairman of the Global Wealth Management Forum and former Minister of Finance of China, stressed that the Chinese government attaches great importance to preventing and resolving systemic risks, and is further improving financial supervision, including the establishment of the State Financial Regulatory Administration, adjusting and optimizing the setting and functional positioning of regulators. At the same time, China will continue to work with financial regulators of various countries to jointly prevent and resolve global financial systemic risks and maintain the stability and prosperity of global financial markets.
High inflation is difficult to fall back in the short term, high interest rates breed hidden risks, and central banks are facing "dilemmas" or even "how difficult" the monetary policy regulation and control of central banks. This uncertainty also makes global wealth management, which is sensitive to macro variables, more challenging.
Ju Weimin reminded that the "weak links" and "vulnerable areas" of economy and finance under the new paradigm are easy to suddenly expose risks and transmit to the outside world. For example, some small and medium-sized banks with insufficient cushions may be greatly affected by their reliance on highly leveraged, cost-sensitive real asset projects and M&A private placements. Institutional investors need to re-understand the underlying logic of risk generation and enhance the initiative, flexibility and adaptability of asset allocation and portfolio management.
In response to the changes, Chen Wenhui, vice chairman of the National Social Security Fund Council, said that it is necessary to continue to enhance capital patience and further increase investment in scientific and technological innovation enterprises. He revealed that in recent years, the National Social Security Fund has not only obtained an annualized rate of return of more than 14% by investing in market-oriented equity funds, but also strongly supported scientific and technological innovation enterprises. Its underlying assets are mainly concentrated in strategic emerging industries such as hard technology, biomedicine, new generation information technology, and new energy, leveraging a large amount of social capital and promoting the listing of hundreds of enterprises.
In a complex environment, the opening, stability and development of the Chinese market have provided diversified opportunities and choices for the world. Xuanchang Energy said that by the end of last year, the balance of RMB assets held by foreign entities in China was 9.6 trillion yuan, an increase of 2017.1 times over 2, and overseas issuers issued a total of 6300 billion yuan of "panda bonds" in the Chinese bond market. He believes that with the gradual recovery of China's economic growth momentum and the further opening of the financial market, the investment and hedging attributes of China's financial assets will become more prominent. (End)