Shenwan Hongyuan Securities Chief Economist Zhao Wei: Building a strong financial institution will solidify the micro-foundation of a powerful financial nation

Source: Zhao Wehong Macro Exploration

Text | Zhao Wei

Summary:

The recently released “Outline of the 15th Five-Year Plan for National Economic and Social Development of the People’s Republic of China” proposes accelerating the building of a strong financial nation. It calls for optimizing the financial institution system, encouraging various financial institutions to focus on their core businesses, improve governance, develop in a differentiated manner, support large state-owned financial institutions to enhance comprehensive service levels, strictly regulate access standards and supervision for small and medium-sized financial institutions, and cultivate top-tier investment banks and investment firms.

Recently, Zhao Wei, Chief Economist of Shenwan Hongyuan Securities, told Shanghai Securities News in an exclusive interview that building powerful financial institutions is of great significance. It will solidify the micro-foundation of a strong financial country, promote the financial system from “big” to “strong,” break through development bottlenecks, support high-quality economic development, and help ensure the steady and far-reaching development of the unique Chinese financial development path.

Main Text

1. China’s Financial Institutions Are “Big but Not Strong”

Shanghai Securities News: Compared to top international financial groups, what areas still need improvement in China’s financial institutions?

Zhao Wei: Currently, China’s financial institutions have a total asset size that remains among the world’s largest, with rapid expansion in scale. However, there are prominent structural issues of being “big but not strong,” such as core competitiveness and risk resistance capabilities still lagging behind top international institutions. In terms of asset size, China’s major state-owned banks are already among the largest globally, but being “big” does not equal “strong” in strength. Leading in size does not mean dominating in core competitiveness. Compared to top international financial groups like JPMorgan Chase, HSBC, Goldman Sachs, our large financial institutions still have gaps in business diversification and global deployment capabilities. This gap directly affects our voice and influence in the global financial landscape.

The core competitiveness of top-tier investment banks and banks lies in diversified profit models, with non-interest income often making up a significant portion. Behind this are strong global asset pricing power, cross-border M&A advisory capabilities, and global wealth management abilities. Our large financial institutions still heavily rely on traditional profit models such as interest rate spreads from deposits and loans, with relatively simple business models and less stable earnings.

Shanghai Securities News: In the context of accelerating corporate “going global,” what is the significance of strengthening internationalization and global operation capabilities for financial institutions?

Zhao Wei: In the process of transforming from large to strong and building a powerful financial country, international operation capabilities are an indispensable strategic support, aligning with top-level design requirements. Internationalization is the core carrier for financial institutions to implement national strategies; it is a key support for breaking through bottlenecks and moving from big to strong; it is also an important way for financial institutions to hedge operational risks and enhance resilience.

Currently, China’s financial institutions are still in the early stages of internationalization, facing issues such as concentrated overseas deployment and insufficient comprehensive service capabilities, with gaps compared to top international financial institutions. Looking ahead, financial institutions should leverage their own advantages, focus on national strategies, steadily advance globalization, learn from international experience while maintaining Chinese characteristics, emphasize risk control and compliance, optimize overseas asset allocation, and improve cross-border comprehensive services. Through internationalization, they can achieve quality and efficiency improvements, truly move from “big” to “strong,” and provide solid support for building a financial powerhouse and promoting high-level opening-up.

2. Chinese Banks Are Transforming into “Comprehensive Financial Service Providers”

Shanghai Securities News: In the current complex and volatile international geopolitical and economic environment, what unprecedented opportunities and systemic challenges do Chinese financial institutions face in advancing globalization?

Zhao Wei: The global economic landscape is undergoing unprecedented changes unseen in a century. Unilateralism and protectionism are rising, global industrial and supply chains are undergoing profound adjustments, and the international financial order is subtly transforming. However, it must be clear that globalization has not ended; rather, it is undergoing a deep structural reshaping. The flow of capital, technology, and talent has adjusted boundaries, but the core demand for cross-border deployment remains. For Chinese financial institutions in the critical period of globalization transformation, this reshaping presents both unprecedented challenges and strategic opportunities for overtaking rivals and enhancing global influence. Opportunities and risks coexist, testing institutions’ strategic judgment and core competitiveness.

Shanghai Securities News: What new changes have occurred in the globalization capabilities of Chinese financial institutions?

Zhao Wei: In the past, China’s financial institutions’ “going global” models were relatively simple, mainly involving basic cross-border settlement and trade finance, serving mostly small and medium-sized foreign trade enterprises, with limited profit margins and heavy reliance on traditional trade chains. Now, with continuous industrial upgrading in China, Chinese companies’ competitiveness in new energy, high-end manufacturing, digital economy, biomedicine, and other strategic emerging sectors has significantly improved. They are gradually shedding low-end capacity labels and systematically expanding capacity output to emerging markets such as Southeast Asia, the Middle East, and Latin America, forming a new “industrial chain going global” pattern centered on leading enterprises and supported by upstream and downstream companies. This new model generates diverse financial needs, providing a natural foundation for Chinese banks to transform from mere “fund providers” into “comprehensive financial service providers.”

3. Enhancing Global Risk Pricing and Financial Resource Integration Capabilities

Shanghai Securities News: To realize the leap from “important participant” to one of the “dominant players” in the global financial arena, what is the most critical bottleneck that Chinese financial institutions need to break through?

Zhao Wei: The most critical bottleneck for China’s financial institutions to transition from global market participants to leaders is their ability to price global risks and integrate financial resources. A true “leader” not only provides capital but also leverages strong research and development capabilities and resource integration to design personalized trading strategies based on market risk characteristics, optimize the matching efficiency of global funds and assets, and even participate in setting global financial rules and standards. The root of this bottleneck lies in management systems, incentive mechanisms, and the degree of international integration, which currently limit Chinese institutions’ “investment banking mindset” and “full industry chain service capabilities” in overseas markets. This hampers rapid response to global market changes and constrains core competitiveness.

In this context, large Chinese financial institutions need to identify clear directions and focus efforts to gradually shift from scale expansion to quality improvement.

Regionally, they should deepen their presence in the Belt and Road Initiative and global southern markets, focusing on Southeast Asia, the Middle East, and Central Asia—areas closely linked to Chinese industrial chains. Leveraging China’s advantages in mobile payments and digital credit, they should promote localization of fintech products, use digital services to break regional barriers, reduce cross-border RMB settlement costs, and enhance local market competitiveness. This will also promote RMB circulation and usage in the region, laying a foundation for RMB internationalization.

In terms of business models, they should accelerate the transformation from “commercial banking-led” to “integrated banking and investment banking,” breaking traditional boundaries and vigorously developing high-value-added services such as bond underwriting, syndicated loans, cross-border M&A advisory, and asset securitization. This will gradually increase non-interest income share and reduce dependence on deposit-loan spreads.

Infrastructure-wise, focus should be on building a cross-border RMB ecosystem, accelerating the global adoption of the RMB Cross-Border Payment System (CIPS), expanding participating institutions, improving transaction efficiency, and lowering cross-border RMB settlement costs. Additionally, cultivating and expanding offshore RMB bond markets—relying on international financial centers like Hong Kong and Singapore—will attract global investors to RMB assets, making Chinese institutions central hubs for RMB asset allocation worldwide. This will gradually increase the use of RMB in global financial transactions, enhance China’s influence in the international financial order, and strengthen the country’s voice on the global stage.

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