Sponsored by the National Center for Financial Research (NCFR) at Peking University, the second International Financial Forum was held on October 16, 2015 at Guanghua School of Management, Peking University. To encourage guests to speak freely and fully express their insights, the forum was designed as a closed-door meeting on the theme of "The Road of Global Investment for Chinese Capital". With slowing down economy, Chinese economy has entered into a new norm. New situations and problems start to appear. In the current context of the continuing turmoil in the financial market, it is just in time for scholars, practitioners and policy makers to make collective efforts to find the optimal solutions for important issues established and initiated by China, such as AIIB, "one belt and one road", investment risk and prospects. The forum themed on global investment, strategic investment and asset allocation is a positive response to the above major issues. The event was hosted by Professor Jin Li, Director of the National Center for Financial Research and Associate Dean of Guanghua School of Management, Peking University. Wei Liu, Deputy Vice President of Peking University made a warm opening speech.

The subsequent keynote speeches highlighted the whole event. Honorary Dean of Guanghua School of management, Professor Li Yining spoke about the institutional reason behind small and micro enterprise financing problem. He indicated that at present, the small and micro enterprises in China are facing two types of discriminations: one is the ownership discrimination, another is scale discrimination. The main reason is that many people do not see the vitality of small firms, and do not take into account the future capital investment benefits. Nowadays, China's employment problem is not the same as that of the 90's. Today, China has no workers, because the supply of migrant workers is less and less, so it is vital to develop small and micro enterprises. The financing of small and micro enterprises needs to have reforms, such as supporting private banks and turning underground finance into the ground. At the end of his speech, Professor Li spoke with confidence that financing and developing of small and micro enterprises will greatly benefit employment problems, agriculture development and small townships construction.

 Keping Li, President and CIO of China Investment Corporation (CIC) first praised that in the context of international economic development strategy, the subject of this discussion is particularly meaningful. China's sovereign wealth fund, with a relatively loose definition, includes three forum participated institutions, namely, State Administration of Foreign Exchange responsible for the management of foreign exchange reserves, social security funds and China Investment Corporation. The strength of China's sovereign wealth fund not only comes from the size of the fund, but also China’s economic background and expansion potential. However, the challenge is how to achieve this potential and optimize the advantages. Facing investees fast-growing demands of growing together with China, how to make it a reasonable economic reality? Another trend is that world's sovereign wealth funds and large international investment companies allocate asset from traditionally focusing on open market, to more and more focus on alternative assets. Large international institutional investors are strengthening and enhancing their internal management capabilities. Compared with them, we have limitations in management, which is also a major challenge to China's sovereign types of funds. We need to improve and create some conditions, pay more attention to the needs of growing with Chinese economy and search for new value-added benefits.

Then, Zhongmin Wang, Vice Chairman of China National Council for Social Security Fund made the speech. He first of all paid tribute to Prof. Li Yining for guidance and help in his academic career. Mr. Wang mentioned that the national social security fund is the reserve fund, and its main battlefield is for RMB settlement, and ultimate benefit return is also China's old-age group. The fund has encountered some obstacles and challenges in communication with supervision departments and the process of foreign investment practice. He indicated that, comparing with other participated institutions, the social security fund has the most difficult way to invest globally. As conclusion, Mr. Wang Zhongmin expressed innovative and personal interpretations of common misconceptions about financial economy, alternative assets and hedge funds.

Guoqiang Long, Deupty Director of Development Research Center of the Chinese State Council shared his insights on "one belt one road" prospects and opportunities.  He stated that both domestic and international communities have warm responses toward “one belt one road” initiative. It is a good start. Accurately speaking, "one belt one road” is regional cooperation initiatives, and has the following features: 1. Larger than TPP, TTIP, RCEP, FTA, etc., is the largest regional cooperation initiative; 2. different from other free trade zone, it is open and inclusive; 3. is South-South Cooperation, China hopes to promote the development of regional economy through new financial arrangements; 4. very rich substance, not a simple external strategy. "One belt one road” initiative contains a lot of investment opportunities. It is a foreign transfer of labor intensive industries. From strategic point of view, it also has huge investment potential for Chinese companies. Of course, this area has some unique risks, such as political risk, complicated background of culture, religion and law, and immature economic market and government corruption. In his final report, Mr. Long called on people to seize this opportunity, draw on the advantages and avoid disadvantages.

The final part of the keynote speech featured Stanford University Professor, Nobel Laureate Myron Scholes’s sharing of his recent research. Professor Scholes hoped to give investors some advice：not to pay too much attention on relative return on investment, but to consider the absolute return; Composite return needs to get more attentions, while the tail risk is also very important. Considering complex investment needs from long-term perspective, earning money is because the extra return would not limit the other returns.

The first session of forum, titled “Opportunities and Challenges for China's global Investment” was hosted by Li Liu, Professor of Department of Finance, Guanghua School of Management PKU. Quest speakers were Yiping Huang, Associate Dean of National School of Development PKU and member of Monetary Policy Committee of People's Bank of China,  Shan Li, chairman of Silk Road Finance Corporation and Peijun Duan, Professor and Chairman of Department of Strategies, Party School of the Central Committee of C.P.C

Professor Huang Yiping stated that from a strategic point of view, the "one belt one road" strategy has significant meaning to our next step in economic development. It creates space for Chinese economy to leap from Chinese model to Japanese model, brings us new competitiveness. However, there are many uncertainties, and many questions remain to be answered. Mr. Li Shan commented that the "one belt one road" is a very important strategic plan, both diplomatically and domestically. It is necessary to engage in a think tank, specialized in relevant research. The establishment of the "Silk Road Planning Research Center" was for this purpose. To implement research results, Silk Road Finance Company was established on October 10th. On “one belt one road” financial development, Li advocated the joint efforts from government support, including government resources, market resources, talent market and international talents, and combining advantages of state-owned institutions and market forces, to create new glories on the silk road. Professor Duan Peijun explored the relationship between "one belt one road" and the existing national strategy. The "double engines" is our domestic economic development strategy, while "one belt one road" focuses on external, including free trade zone, and is the strategic extension of “double engines”. They complement each other in one strategic structure. Prof. Duan also talked about risks in strategy, investment, and security emerged with “one belt one road” initiative. 

The second session was carried out around “New perspectives on global strategic investment”, hosted by Yu-Jane Liu, Chair of Department of Finance, Guanghua School of Management PKU. Quest speakers include Hongyan Li, Chief Operating Officer, Investment Center of State Administration of Foreign Exchange, Yuyin Zhan, Chief Investment Officer, National Council for Social Security Fund, Yiqing Zhang, Managing Director of Public Equity Investment Department, China Investment Corporation, and Myron Scholes.

Ms. Li Hongyan introduced innovative applications of foreign exchange reserves and problems existing in the process. Zhan Yuyin cited from the operational level the internal and external challenges faced by social security fund, including the impact of the new economic model and strengthened supervision. Zhang Yiqing pointed that while “one belt one road” is to expand development space, another dimension is directed by technological progress. New technology may bring us strategic impact and changes. Prof. Scholes claimed that big data may have huge impact on financial sector. Financial sector has been fairly static, but financial institutions are constantly changing. To reduce information asymmetry, we need more rapid, personalized and customized financial service. For example, there is a new way of keeping accounts. In the future, we will see horizontally flow of ledger account. And that must rely on big data. Professor Scholes reminded us that the original vertical thinking has to be transformed into horizontal thinking. Mr. Zhan Yuyin added that information technology develops much faster than we can imagine. The transmission, speed and coverage are completely different from the past. We need to consider how that changes investment and our work. The overflow of information itself may not so valuable, but transmission and decision-making mechanisms behind it should cause everyone's attention.

    The last Session was elaborated on “Asset allocation at rapidly changing global economy”. Min Song, Chair of Department of Finance, School of Economics, PKU served as MC, and invited speakers include Edwin Cass, CIO of Canada Pension Plan Investment Board, Leslie Teo Eng Sipp, Chief Economist and Head of Investment Strategy, Singapore Governmental Investment Corporation, and Yuan Zhou, CSO of China Investment Corporation.

Cass Edwid introduced the asset allocation mechanism in Canada Pension Plan Investment Board. Teo Eng Sipp Leslie reviewed the historical development of Singapore Governmental Investment Corporation. He specifically called attention on current issues such as low interest rate environment, demographic characteristics, population changes, technology impact, valuable asset class, as well as evaluation problems. The corresponding possible solutions include holding cash, paying attention to non conventional, non systematic trend, and educating stakeholders to have the right expectations and to know your expectations. In the final statement, Mr. Zhou Yuan stressed that today’s discussion of asset allocation focus on institutional investors. We need to solve ordering and compatibility problems. At the same time, under different market conditions, the investment portfolio performance will not be the same. Mr. Zhou claimed that from the beginning of the 70's, asset allocation entered into the so-called “modernism era”; after effective marginal proposed, some institutions began to enter the post-modernism era. In any case, asset allocation is a must-have function; just don't have unrealistic expectation on its value generating.

The second International Financial Forum has invited many distinguished experts and scholars in the field of finance, as well as the responsible persons in policy agencies and investment institutions. The in-depth discussion and frank exchanges among participants laid good foundation for further dialogue and cooperation, which is exactly the purpose for NCFR to initiate and host the forum. Sponsored by Zhongzhi Group, the National Center for Financial Research is a new research institute and high-end think tank As an open research platform with global perspectives, the Center aims to apply world-class academic research to financial practices in China, to achieve its goals of addressing major financial issues facing the country and society, building a solid analytical foundation for financial reform, offering policy analysis for financial policy-making and regulation, and supplying creative ideas and technology for the construction and development of the Chinese financial market.