2022 Financial Street Forum
Countries Should Include Biodiversity Risk Management in Fiscal Policies
We should collaborate to address the dual challenges of climate change and biodiversity loss and include biodiversity risk management in fiscal policies to channel greater public and private investment to nature conservation and restoration projects. —Deborah Lehr, Vice Chairman and Executive Director of the Paulson Institute
On the evening of November 21, 2022, Financial Street Forum held a panel discussion on Macro Policy: Actively Dealing with Multiple Shocks during its annual conference. Experts from government, financial institutions, and international agencies shared their views on the global macroeconomic and China's economic situation. Deborah Lehr, Vice Chairman and Executive Director of the Paulson Institute, was invited to deliver a keynote. Chengjun Zhou, Director of the Institute of Finance of the People's Bank of China, moderated the panel, which featured speakers:
- Changneng Xuan, Deputy Governor of the People's Bank of China,
- Hal S. Scott, Emeritus Nomura Professor at Harvard Law School,
- Yuanchun Liu, President of Shanghai University of Finance and Economics,
- Linghui Fu, Spokesperson of the National Bureau of Statistics and Director General of the Department of Comprehensive Statistics of the National Bureau of Statistics,
- Weidong Wang, Vice President of China Development Bank, and
- Hugues de La Marnierre, Group Country Head and CEO of Societe Generale China.
In a global context, Deborah Lehr stressed we should respond to the dual challenges of climate change and biodiversity loss concertedly. For example, poorly selected sites for clean energy infrastructure could jeopardize biodiversity, which would accelerate climate change due to the reduced capacity of natural ecosystems to absorb and store carbon and weakened resilience to climate change. She said, "There is growing evidence that shows achieving net zero carbon emissions targets requires healthy ecosystems and the application of nature-based climate solutions (NBS)."
She pointed out that the 2020 report Financing Nature: Closing the Global Biodiversity Financing Gap , published by the Paulson Institute, The Nature Conservancy, and Cornell Atkinson Center for Sustainability, indicates an annual funding gap of about 700 billion USD in global biodiversity conservation spending and needs. Nearly half of the worldwide economy, about 44 trillion USD, is highly or moderately dependent on nature and various ecosystem services.
To bridge the biodiversity financing gap, she suggested incorporating biodiversity risk management into fiscal policies and directing more public and private funding to nature conservation and restoration projects. "If we can reform the subsidy policy for high emitters and include biodiversity and risk considerations in investments, we will be able to help close the above funding gap." She said that leveraging private-sector funding is not an easy task because there might not be obvious returns on investment. She, therefore, suggested the government could do this by creating the right incentives and regulatory frameworks. Meanwhile, exploring new financing channels and expanding existing ones for nature-conservation-related industries is also essential.
China's Economy: Promote the Development of Long-term Mechanisms for Financial Stability
Changneng Xuan, Deputy Governor of the People's Bank of China, pointed out that China's development is entering a period of strategic opportunities and risk challenges, and the foundation for China's economic recovery is still not solid. So it is necessary to maintain financial stability effectively and firmly guard the bottom line of no systemic financial risks. He said we should increase the Total Loss Absorbing Capacity (TLAC) of China's global systemically important banks to guarantee their adequate loss absorption and recapitalization capacity. Additionally, we should improve the macro-prudential management system, avoid cross-institutional and cross-market contagion of financial risks, strengthen the overall supervision of systemically important financial institutions, enhance the stability and health of China's financial system, and prevent and resolve systemic financial risks.
Weidong Wang, Vice President of the China Development Bank, said that the global economic downtrend might further weaken external demand, but China has potential advantages. These include continuous industrial structure optimization and upgrading and new growth drivers. China's positive fundamentals for the long term have not changed, and the series of measures to stabilize the economy have been put in place and proven effective. He noted next steps are to increase financial support for the real economy, make good use of development finance tools, bolster the support for critical areas of infrastructure, and effectively expand the demand.
Linghui Fu, Spokesperson of the National Bureau of Statistics and Director General of the Department of Comprehensive Statistics of the National Bureau of Statistics, said in his remarks in the face of a complex and challenging global environment, the world economic downturn, extreme weather, COVID-19, and many other difficult factors beyond expectations, China's national economy has withstood the pressure and continued to recover. China's GDP grew three percent year-on-year in the first three quarters, up by 0.5 percentage points from the first half. Looking ahead to next year, he believes that, despite many challenges at home and abroad, China's positive economic fundamentals for the long term remain unchanged.
In his remarks, Yuanchun Liu, President of the Shanghai University of Finance and Economics, discussed three focal points of China's macroeconomic policies and touched upon the best timing, target setting, and combination of policy tools. Against the backdrop of sluggish global demand, he suggested there could be room for policy adjustments next year to build a solid foundation for a full economic recovery.
World Economy: Strengthen International Collaboration to Address Multiple Challenges
Hal S. Scott, Emeritus Nomura Professor at Harvard Law School, cited data indicating that during the 20 years from 2001 to 2020, the return from China concepts stocks listed on US exchanges was higher than that of US stocks. Despite the threat of delisting Chinese stocks from US exchanges due to external political factors, US investors need China concepts stocks and vice versa. Both China and the US should strengthen communication to avoid the delisting threat.
Hugues de La Marnierre, CEO of Société Générale China, spoke about the challenges posed by the current world economic adjustment and how China's economic growth, as an important link in the global value chain, is crucial to global economic recovery. He emphasized the need for continued China-EU collaboration in sustainable finance, including promoting the application of the Common Ground Taxonomy, amplifying support for green buildings, and establishing a systematic disclosure framework. In addition, He suggested that China should expand the scope of pension support and affirmed that the People's Bank of China's digital currency promotion could help improve the security of cross-border capital flows. Developments in these areas all rely on in-depth international collaboration and exchanges.