W43 - Financial Innovation Reflected from Jack Ma's Bund Summit Speech

This weekend, Mr. Ma's speech at the 2nd Bund Finance Summit went viral — even in 'retirement' he still stirred the pot.

Mr. Ma's pithy lines were, as always, highly provocative; young people listened with excitement and instinctively rose to applaud. I'll quote a few for context.

China's financial system has no systemic risk, because there is no system!

True innovation will have no one to lead it; trying to control risk to zero is the greatest risk of all!

Today we need 'policy experts,' not bureau-chief-style 'document experts'!

Some of our bureau chiefs, in their supervision, end up ensuring that they themselves have no risk and their departments have no risk, but the whole economy has risk and the economy fails to develop!

Chinese banks still think like pawnshops, and that has harmed many entrepreneurs. The dry ones die of drought; the wet ones drown!

For the past 16 years, Ant has persistently kept exploring. If inclusive, green, and sustainable finance is a mistake, then we are willing to be wrong to the end!

To summarize, Mr. Ma expressed three main points.

First, he criticized the inertia in our risk-control mindset. That is, path dependence — dependent on what? Dependent on Europe and the US. Regulatory and institutional design is not forward- or market-oriented but oriented toward Europe and the US. He basically questioned the Basel accords' applicability to China. He called Basel a club for the elderly, while we are a young economy and cannot use old methods to solve new problems.

Second, he said innovation must pay a price, and our generation must take responsibility.Doing innovation with no risk is killing innovation; often making risk zero is the biggest risk. He cited the example of P2P, saying we cannot, because of P2P, deny the internet's potential to innovate in finance. He also hinted that fintech firms shouldn't shoulder all the blame for P2P's failures.

Third, he said the essence of finance is credit; we must abandon the pawnshop mentality in finance and rely on a credit system.This reminded me of a talk I saw years ago by Wang Mingfu of Hejun Group, which had similar views. China’s financial market is big banks with small capital, so it is bank-centric; banks are mortgage-based, and the collateral is largely real estate. From this, a clear and harsh conclusion emerges to the observant.

The whole piece targeted regulation and risk. Of course, the vice finance minister fired back remotely during a speech that day, rebutting Mr. Ma's 'flippancy.'

Below I’ll briefly share some of my thoughts.

First, on major topics in formal settings, China increasingly has the confrontational atmosphere seen in foreign parliaments — a visible social progress, though whether it’s sustainable is unclear. After all, there is only one richest person.

Second, as a current frontier of financial innovation, the piece mentioned digital currency multiple times. I’ve recently read some related material — not deeply — so I’ll cite a few viewpoints that inspired me; they come from people who could shape the industry’s future. One leans left, the other leans right.

The first viewpoint comes from Mu Changchun, the current director of the Digital Research Institute; his view leans right. I studied his digital currency course on the Dedao platform — it’s introductory. In the final lecture he discussed the distinction between finance and the internet. The main point: the methods in finance differ from those in the internet. Internet people building products first ask, what is the model? Can it make money? Financial people often first ask, is there risk? He said that in finance, internet entrepreneurs — even large companies like Facebook — lack sufficient risk awareness. He cited P2P and Xianghubao as examples and noted that internet-style “310” loan models may look appealing but, without a full financial cycle test, carry hidden risks. Therefore, he argued that countries’ digital currencies, including Libra, should be subject to strong regulation.

The second viewpoint comes from a book I recently started reading, "Digital Currency: The Inheritance and Innovation from a Slate Economy to a Digital Economy," published in April. Written by Long Baitao: I checked — he completed his BS/MS/PhD in computer science at Tsinghua, held senior positions at Accenture and IBM, is a serial entrepreneur, and now works as an independent researcher on blockchain and the digital economy. I decided to read it after seeing Wang Wei’s foreword.

I’ll quote a passage that struck me: “For established mainstream scholars, opinions and logic from people like Long Baitao seem chaotic, shallow, and aggressively amateurish; they even disdain them. These scholars remain immersed in the cognitive level of decades ago, no longer following new monetary ideas circulating on modern online media, enjoying the repetitive self-reinforcement of authority in classrooms, TV, and forums, and protecting their reputations.”

Know that Wang Wei is considered an insider; his writing such things in a preface indicates the book is worth reading, and I recommend it. I suspect the book’s stance would also suit Mr. Ma’s taste.