Wei Shangjin, Professor Of Columbia University: Science And Technology Innovation Board Can Introduce Short Mechanism Under Controllable Risk, And There Are Three Opportunities For Global Carbon Neutrality

On July 22, 2019, the first batch of enterprises on the science and technology innovation board went public, attracting attention from the global capital market. Today, the science and technology innovation board has been running smoothly for more than two years. So far, it has more than 300 listed companies.

The science and technology innovation board has played a leading role in helping science and technology innovation enterprises to become bigger and stronger, and has become the main battlefield of capital market supporting innovation driven strategy. How do industry experts comment on the effectiveness of the science and technology innovation board in the past two years? Is the registration system in line with expectations?

At the same time, the scientific and technological innovation board is positioning hard technology, which makes people realize the importance of industrial chain independence. Many science and Technology Innovation Board companies occupy the leading position in the subdivision track, but there are still some links facing the problem of "neck sticking". Behind this is the continuous refinement of the global division of labor in recent 40 years. In the current era of globalization, what problems will the global division of labor face in the future? In particular, what changes have taken place in Sino US cooperation and competition relations in recent years? Is there an "optimal solution" for Sino US trade relations?

In addition, at present, "carbon peak" and "carbon neutralization" have become hot words. What challenges will China face in submitting papers on time? Globally, how should we think about the direction and focus of future innovation policies?

On the above hot issues, the 21st century economic reporter exclusively interviewed Wei Shangjin, a lifelong professor at Columbia University, an academic visiting professor at the school of oceanwide international finance, Fudan University, and former chief economist of the Asian Development Bank to answer the hot issues.

Professor Wei Shangjin, tenure Professor, Columbia University

The reform of the pricing mechanism of the science and Technology Innovation Board: introducing short selling mechanism under the condition of controllable risk

21st century: the science and technology innovation board celebrated its two-year-old birthday in July. There is also a section in your new book "looking for the best economic solution" that specifically talks about the future of the science and technology innovation board and China's economy. What's your comment on this board that has just been running for two years?

Wei Shangjin: first of all, there are many bright spots in the operation of the science and technology innovation board over the past two years, and there are many commendable aspects.

The science and technology innovation board is very important for China's future development, because China will take the improvement of productivity and scientific and technological innovation ability as the driving force of economic growth. However, the development of science and technology innovation industry has one characteristic, that is, the early investment time is relatively long, the amount of investment is relatively large, and there is great uncertainty, which makes it difficult for scientific and technological innovation enterprises to get financial support from banks. In the case of insufficient bank support, whether the capital market can provide funds for the start-up stage of science and technology innovation enterprises is directly related to the speed and level of China's science and technology innovation development in the future.

Due to the strict listing conditions of the main board, many new enterprises in the science and technology innovation industry are not suitable for listing on the main board. The science and technology innovation board has made up an important short board.

Second, it is necessary to continue to improve the science and technology innovation board. For example, some Chinese science and technology innovation enterprises listed in New York can not be listed on the science and technology innovation board. Next, the further reform and development of the listing system on the science and Technology Innovation Board will also pave the way for China's sustained economic growth.

21st century: compared with NASDAQ in the United States, in terms of system, what else do you think needs to be improved in the science and technology innovation board?

Wei Shangjin: as a new thing, the science and technology innovation board must have many aspects to be improved. For example, the phenomenon of institutional investors holding down prices in the IPO pricing link of the science and technology innovation board, which is more concerned in China, is not conducive to the financing of science and technology innovation enterprises.

The IPO pricing form of the science and technology innovation board is different from that of the main board. The main board is priced by the Underwriters, while the science and technology innovation board is priced by inquiry from institutional investors. Among the institutional investors, the market share is relatively small, so they are easy to hold prices down. This phenomenon does not appear in Nasdaq and other mature markets, mainly due to two differences in mechanism design.

The first difference is: the pricing of NASDAQ's IPO is determined by the underwriter, and the underwriter is chosen by the issuer, that is, the listed company itself. Without the link of inquiry to institutional investors, there will be no opportunity for institutional investors to hold down prices. But this is not enough, we need to consider whether IPO pricing will be too high.

The second difference is that the pricing of the whole Nasdaq market, including the secondary market, is more rational, and the pricing of the primary market should be linked to the secondary market. In the secondary market, firstly, there are more institutional investors, and the proportion of retail investors is relatively low; Secondly, there is a mature short selling mechanism.

Short selling mechanism is very important to the rationality of IPO and secondary market pricing. The stock price is actually a comprehensive reflection of various investors' opinions in the market. Some investors focus on the good factors, while others emphasize the risk factors, because they get different information and process and judge different information. In a market where you can buy or sell short, both positive and negative opinions will be reflected, and then you can get a better combination and balance. However, the short selling mechanism of China's stock market is relatively lacking, or the cost of short selling through margin trading is very high. As a result, only investors who think the company's valuation is high will participate; Investors who believe that the company's valuation is low, except not to buy, or have no other way to express their views on the value of the company. In this way, the average valuation of the stock by market participants is likely to be high. And if there is more clear negative news, the stock price may fall sharply.

The valuation characteristics and price volatility of these secondary markets also affect the design of IPO system. For example, the domestic main board listing takes into account the trend that the stock price deviates from the fundamental high side, and the administration limits the upper limit of the P / E ratio. The IPO pricing of the science and technology innovation board tries to change its approach, and tries to use the method of inquiry from institutional investors, without setting the upper limit of P / E ratio. But it turns out that there are also problems, because the number of institutional investors is not large, they may collectively depress the price, so that they can get the stock to obtain higher profits.

These aspects can be solved through reform. China's development over the years should be said to be quite mature, and the number of institutional investors in the secondary market has also increased greatly. If we can continue to cultivate the participation of institutional investors, and introduce short selling mechanism under controllable risks, once the price rationality of the secondary market has been greatly improved, both the science and technology innovation board and the main board can adopt the international common method, that is, the listed company selects the underwriter, and then pricing together with the Underwriters according to the judgment of market demand. In this way, the pressure of institutional investors should also disappear.

Wei suggested that we should use more market and price signals to reduce the cost of achieving carbon neutrality. Xinhua News Agency

Sharing the fruits of globalization needs supporting reform

"21st century": the science and technology innovation board locates hard science and technology. Through the operation of this plate, people realize the importance of the independence of China's industrial chain. However, there are still many "neck sticking" links in many science and technology fields, which are actually the result of the continuous evolution of global division of labor. But why is the current global division of labor so fragile?

Wei Shangjin: globalization can make the cake bigger, which is applicable to most countries. However, making the cake bigger does not mean that everyone in each country can make his own piece of cake bigger, because in order to make everyone benefit, it needs some supporting reforms in various countries, but many countries have not done so. This is a major reason for the anti globalization wave.

In the process of globalization, the most beneficial group is the powerful group in the society. After the cake is bigger, they don't necessarily want to share it with the relatively disadvantaged groups, which makes the vulnerable groups feel that the cake has nothing to do with themselves, and even their interests will suffer losses. So whenever there is a chance, these groups will oppose globalization. For example, many blue collar workers in the United States have seen the profits of American companies soar due to globalization, but their own wages tend to fall instead of increasing, and the government's policies have not made part of the company's profit increase translate into the welfare of workers. As a result, many workers strongly oppose the globalization of trade, investment and immigration. In other words, those who advocate anti globalization are actually against the uneven distribution of interests in globalization.

It is not only a rule but also a general rule that globalization needs the supporting reforms of various countries. But it is very different in different countries. In some countries, institutional arrangements are flawed and supporting reforms cannot be carried out. The result is that we prefer not to have globalization that can make a big cake, or if the development of globalization is developed, the government will reverse it. For such a country, long-term development is problematic.

In some countries, through the game of various groups, some countries make matching reforms, including transfer payments from the winners of globalization to losers, and provide re employment training and assistance to the losers and their families. These countries can often push forward globalization and obtain the improvement of overall living standards and productivity from the cake increment. As a result, these countries will be able to maintain long-term and steady development.

21st century: on the issue of counter globalization, there are actually many views that the direction of globalization can not be changed. What do you think of this?

Wei Shangjin: globalization is not irreversible. As long as there are enough people against it, it will be reversible. We can see that it is sometimes difficult for many countries to carry out globalization, because even if the cake becomes bigger, these countries can not guarantee that all the people can be fairly shared.

In the past 40 years, China's reform and opening up has been a very important link. The reason why China's economy has grown so fast is that it adheres to openness in trade, investment, science and technology, personnel exchange, and ideological exchange, and most of them can benefit from opening up.

On the contrary, many other developing countries, such as India, can not find a reasonable institutional arrangement to ensure that the winners of reform, especially the stronger winners, can share the increment of the cake with the losers.

I have seen an important infrastructure project in India, called the Dehli Mumbai corridor, to connect New Delhi and Mumbai, India's first and second largest cities. But the corridor was designed to avoid many other small and medium-sized cities between New Delhi and Mumbai. This seems unreasonable from the perspective of economic level and economic scale. We all think that we should connect all the cities in order to maximize the advantages of reducing transportation costs brought by the new infrastructure. The reason why they do this is that the cities connected by corridor construction need land acquisition, and land acquisition involves many interests, so that they can not do it. In fact, this is an example of a cake that can be made big and distorted, which will cost people money and make it deformed.

In Latin America and Africa, we have repeatedly seen that many reforms that are beneficial to the overall interests of the people can not be carried out. There is a situation that the distribution of the cake is uneven and cannot be corrected through transfer payments or other supporting reforms. An important reason for the uneven distribution of the cake is not that other people can't see that the cake will become bigger, but that once things are done well, the people who are most capable of taking the benefits need to share them with the relatively vulnerable groups. But if there is no system to restrain the strong, they don't want to share. Therefore, when I am in a vulnerable group, it is not good for me to do so. I will oppose it through various means. As a result, you will not let me share the big cake, and I will not let you make the cake bigger successfully.

Anti globalization is also related to another feature of globalization. This feature is that globalization sometimes involves domestic interests and foreign distribution, leading to many people strengthening the idea that globalization is not good for themselves. What they think is that globalization makes foreigners cheaper, they are even more reluctant to do it. The uneven distribution of interests and the bias in propaganda are more likely to make globalization impossible.

On the contrary, if any country can adhere to globalization and find better institutional arrangements, one is to make the cake bigger, and the other is to make the cake distribution more equitable. These countries will have faster economic growth and faster improvement of people's lives. Therefore, in the long run, the distance between countries that can and cannot do well in globalization will gradually widen.

21st century: how should China find its own position in the changing globalization pattern?

Wei Shangjin: China's rapid growth in the past 40 years, reform and opening up are very important. In this sense, China has been an important beneficiary of globalization over the past 40 years and also an important contributor to globalization. In the following development, China is speeding up the construction of a new development pattern with the domestic big cycle as the main body and the domestic and international dual cycle promoting each other. The dual cycle is very important, and we need to realize that it is still very meaningful for China to continue to open up.

In some areas, China is in the leading position in the world due to resource endowment or division of labor, because division of labor can always make a country's comparative advantage play better, and also make the country's growth rate reach the optimal level. Even if China wants to develop technology in an all-round way, it is impossible for China to lead the world in all fields.

Of course, from the perspective of reducing the risk of "international supply interruption", it is also an integral part of the optimal internationalization strategy to invest in some key technologies and key components at the expense of some short-term benefits in exchange for long-term and stable development.

Maintaining a high degree of linkage with the world economy is an important link for China's economy to maintain a relatively high growth rate in the future, including exchanges in trade, investment, technology and other fields. Therefore, we must continue to give full play to the advantages brought by globalization to China and actively participate in the reform of the international economic order. If more countries and people can benefit from globalization, globalization will become more sustainable.

The future Sino US relations will be more complicated

21st century: in the process of globalization, Sino US relations have always been the focus of market attention. What changes have taken place in Sino US relations in recent years?

Wei Shangjin: great changes have taken place in Sino US relations in recent years. In addition to trade frictions, technical frictions are intensifying, so domestic attention has been paid to many so-called "neck sticking" technologies.

American President Biden has not changed his previous economic policy toward China since he took office. For example, former U.S. President Trump's new tariff measures on China have not been withdrawn, but he has made some adjustments. One of the important adjustments is that most policies should be heard together with allies, which actually raises the threshold for the introduction of new policies. Some EU countries did not support many of the practices of the previous government. For such a policy, the president should first consider whether he can persuade his allies. If not, he may choose not to introduce such a policy. This is a change.

Now the U.S. government also believes that China is a long-term competitor, or the only country with the ability to compete with the United States for a long time. This statement is understandable from the perspective of economic strength and the United States. Unless there are similar events that are directly dangerous to the national security of the United States in the next few years, the competition between the United States and China will be a new normal.

The important difference between the current U.S. government and the previous one is that the current government also involves many other dimensions when defining its national interests. For example, President Biden mentioned that the control of global climate issues is an important national interest for the United States. On this issue, it is clear that the United States must cooperate with China in order to be effective. It should be said that all countries need cooperation on this issue, and China's role is certainly indispensable. Therefore, the relationship between China and the United States will continue to be complex, but there is still room and opportunity for cooperation.

21st century: you mentioned that we can make the cake bigger. Can we solve the trade friction between China and the United States through this method? Is there an optimal solution?

Wei Shangjin: the optimal solution is not that there is no friction, but to find the relatively best solution under certain constraints. This restriction includes that the long-term competitive situation between the two countries should be maintained, but at the same time, there are still many areas for cooperation, and the United States will also take into account multiple dimensions of its national interests.

Global climate change is actually a very important aspect, because global climate change is one of the few challenges that can threaten the survival of mankind as a whole. If we want to solve this problem, we need cooperation from all over the world, especially from China and the United States. There are many specific aspects of these cooperation. For example, in order to achieve carbon neutrality, many open technologies need to be shared through technology, including paid sharing, so that the global emission reduction can be carried out smoothly.

In addition, since July 16, China's carbon emission trading market opened, while the United States does not have a national market. In order to make the world achieve the goal of carbon neutrality, an international carbon emission market is needed. The smooth operation of this market must require the cooperation of the United States, China and other countries. In addition to climate change, there are many areas that need cooperation, such as water resources management, the development of basic science and so on.

"Big stick and carrot" is needed for global carbon neutral goal

21st century: on the topic of carbon neutrality, there is a view that carbon neutrality is a trap set by developed countries to limit developing countries. What do you think of this view?

Wei Shangjin: carbon peaking and carbon neutralization are certainly very challenging for developing countries, including China. China's largest carbon emission industry is the energy industry, accounting for about one-third of the country's carbon emissions. It's not easy to be carbon neutral in this industry alone. In order to achieve carbon neutrality, it is necessary to transition all industries in the most basic fields of economy and life from the current emission to zero emission, which obviously requires great industrial restructuring, as well as the major investment of national finance or enterprises.

Many people are worried that carbon peaking and carbon neutralization will have a negative impact on economic growth, but in fact, we should see that efforts to achieve carbon neutrality also provide many new opportunities for economic growth. I think there are at least three aspects:

First, efforts to achieve carbon neutrality will reduce many pollution at the same time, including the improvement of air quality, which in itself will improve the real life of ordinary people. Whether or not such a change is included in GDP, it is a substantial improvement in the quality of life for the Chinese people.

Second, to achieve the goal of carbon neutrality in the future, many technologies need to be developed, such as battery technology. How to make the battery smaller and use longer, these technologies have commercial value all over the world. In particular, the world needs to introduce policies to reduce emissions, and the market value of these technologies can be very high. Countries that are the first to develop these commercially valuable technologies will be the first to gain new investment and growth opportunities.

It was mentioned just now that the world needs to develop an international carbon emission trading market to solve the challenge of climate change in the future. This trading market will turn successful emission reduction into a product that can be exported. If a country can do a good job in solving the problem of carbon emissions, it can take a step ahead and may become an exporter of carbon emission trading market, which is equivalent to giving them an additional source of economic benefits.

Therefore, there are many challenges and opportunities for the dual carbon target. We should look at the problem from a dialectical point of view. Now that we have set a goal, we must try to give full play to its possible opportunities. The more successful China is in carbon emission reduction, its international voice will be further enhanced not only on climate issues, but also on many other issues.

21st century: you mentioned that the global carbon neutral goal requires "big stick and carrot". What kind of measure is this? Especially for developed countries, is such an incentive policy effective?

Wei Shangjin: the so-called "stick and carrot" refers to the transformation of production and lifestyle in order to solve the climate problem, which requires both positive and negative incentive policies.

The so-called "negative stimulus" or "big stick" is that China needs to use carbon tax, including through the arrangement of carbon emission trading rights, to increase the cost of carbon emissions. In cross-border transactions, global carbon tariff arrangements may need to be considered. If one country controls carbon emissions while other countries allow carbon emissions, enterprises in this country will lose their international competitiveness. At this time, the pressure can be increased in the form of carbon tariffs to make greater efforts to reduce emissions.

The so-called "carrot" refers to that developed countries and countries with upper middle income should have the obligation to provide economic and technical assistance to developing countries that have not yet developed well. On the one hand, it helps them reduce the economic burden of transformation, on the other hand, it reduces the cost of emission reduction behavior, or subsidies. We need sticks and carrots to work together to get things done.

The situation is different in different developed countries. Australia, for example, did not say it wanted to be carbon neutral, because Australia's resource endowment showed that its carbon emission costs were particularly high. There are also some countries rich in fossil resources in developed countries, and their willingness to transition to carbon neutral is not strong. For these countries, there is also a need for "sticks and carrots", especially "sticks". If there is an international agreement to impose carbon tariffs, then Australia needs to transform, whether it wants it or not.

As far as the relationship between developed and developing countries is concerned, with the "big stick", that is to say, there is a punishment mechanism for countries that have failed to reduce emissions, which will also increase the willingness of developed countries to provide "carrots". That is to make developed countries more willing to provide resources, technology and funds to help developing countries. On the other hand, if developing countries want to accept the "big stick" mechanism in international agreements, they must have "carrots".

If the whole world wants to solve the problem of climate change, it must be a combination of "sticks" and "carrots". The best way is not for each country to come up with its own policies, but also to let the world use a unified and relatively high carbon emission cost standard through cooperation agreements, so that all enterprises and consumers in the world can respond and reduce emissions together in life and production.

Moreover, global emission reduction can reduce the total cost of global emission reduction to the minimum through the arrangement of global carbon emission trading market. Some countries, for example, have plenty of sunshine or wind power, and they can benefit from selling carbon emission rights without using fossil energy for power generation. In addition, some countries have many carbon emission problems due to their industrial structure. In order to obtain a better transition period, they can purchase carbon emission rights to make their transition smoothly. In the process of industrial structure transformation, there is a need for interest redistribution. Both the carbon trading market arrangement and the "stick and carrot" are designed to let everyone benefit from the structural transformation.

21st century: the last question is back to China. In order to achieve the goal of carbon neutrality, what is the policy focus in the future?

Wei Shangjin: there are many. One of the important points is of course to give better play to the power of the market. In the face of the same goal, we should use more market and price signals to reduce the cost of achieving carbon neutrality.

The national carbon emission trading market, which started operation on July 16, is a very important tool, but it needs to be further improved, because the current carbon market is only concentrated in the energy industry, and it needs to be expanded to steel and cement industries in the future. Another link that needs to be expanded is the need to link up with the international market and increase the unit price of carbon emission in the transaction, because the cost of carbon emission is still relatively low.

Another aspect is how to change the mode of production of enterprises and how to open a low-carbon lifestyle for ordinary people. There are some interesting attempts in China, such as encouraging people to travel with low carbon through big data and business design of enterprises. Ant forest is an example. There are many dimensions to this, and China's interesting attempts are likely to serve as models for other countries.