Fu Chang Bo, professor at the Beijing Normal University, shares his views on wealth redistribution and how philanthropy can play a crucial role to reduce income inequality in China.
In this session, Fu Chang Bo, professor at the Beijing Normal University talked about the accumulation of wealth among the world’s richest 1% and the increasing income inequality that has resulted from unsustainable development. He called for the financial service industry to address these challenges through innovative financial products and services that can further enhance the green agenda. He shed light on China’s drive to attain common prosperity for the overall welfare of society and the economy.
Below is the edited transcript:
Good morning, everyone. I am pleased to attend the Wealth and Society 2021 conference hosted by The Asian Banker and to hear that the China Social Innovation Institute of Beijing Normal University (BNU) where I am currently working has been recognised as the academic partner of this event.
The conference theme “New Wealth, New Responsibility” is a noteworthy title that highlights the global crisis which is unseen before. Initially, the conference was scheduled to be a physical event, then delayed and finally, the conference is now hosted virtually, all of which are caused by COVID-19 restrictions. The conflict between human society and nature has entered into an irreconcilable phase with global warming, vanishing biodiversity, worsening wetland ecology and other serious issues, which therefore calls for the joint action of the global citizenry.
Another pressing issue that needs attention is the ever-increasing disparities in wealth distribution. Data and reports showed rising wealth accumulated by the world’s richest 1% or 0.1% post the outbreak of COVID-19, while the majority of the population is still grappling with poverty. Therefore, we are forced to rethink the development of human society over the past 400 years since the industrial revolution. Particularly, the role that the financial industry plays in development as one of the pillars of the modern economy. The paradigm shift in the financial industry began at Wall Street where financial activities first emerged from loans to financial derivatives by incremental credit and issuance of the national debt. Is such a development right, or not? ? And if not, how do we regulate it? We will discuss the theme in depth.
We are very pleased to have various leaders from trust companies, private banks, family offices and other relevant organisations here at the virtual conference. China has advanced into the new century that saw the creation of a moderately prosperous society in all respects and is now moving on to an all-out effort to build a modern socialist country. The Chinese government has therefore announced that common prosperity will now be a long-term strategic goal that could not be achieved immediately. Globally, the term common prosperity is defined as a community with a shared future for mankind. In addition to the goal of common prosperity, the Chinese government also rolled out “dual carbon” goals.
“Dual carbon” goals, from a global perspective, are a community with a shared future for mankind and nature with the vision for global sustainable development for all life forms. For these ideas, I think, generally speaking, we are taking a leading position in the global stage. China, as a major Asian country and the second-largest economy in the world, there are many approaches can be explored to drive innovation in the financial services industry, boost sustainable development and achieve common prosperity. In recent years, I have been committed to promoting the family philanthropy and wealth inheritance. I think the financial services industry may focus on the following aspects: First, the industry may attempt to create sustainable green development related services, innovative organitions rankings or social value investing rankings, such as innovative products in green finance, rural vitalization and Belt and Road Initiative. It will be valuable to tap into new services and financial service standards.
Second, the industry may collaborate with different social institutions. Some trust companies have started to promote family charitable trust business. Some private bankers combine part of their own social responsibility investment funds along with a small portion of profits from the investment entrusted by their clients towards implementing valuable and innovative charity activities. Cross-border cooperation is also worth trying.
Finally, senior executives from the financial service industry will have to take up the role of a wealth and philanthropy advisor. They help the high-net-worth individuals raise their wealth in a more meaningful way. The wealthy could transform the family business, preserve family wealth, and operate family charity and trusts to ensure the long-term sustainability of the family enterprise while care about others and the society. They may establish a family philanthropic foundation and charitable trust also known as trust business with multiple purposes. For instance, the donor-advised fund has been developing rapidly in the US and Canada over the last ten years. In China, the philanthropic framework and system, especially the incentives for donors to engage in philanthropy is still in a nascent stage. However, China has witnessed the increasing involvement of social groups. For example, Mr. Cao Dewang, Mr. He Xiangjian, the founders of the Midea Group and Mr. Lu Weiding who established one of the largest charitable trusts in China. The existing policy although imperfect remains feasible.
I hereby call on all peers, senior leaders and experts in the financial services industry to jointly develop the ecosystem and services for family wealth inheritance and philanthropy planning. It’s worth it. As a promoter and researcher of family charity over the past years, I’m very pleased to learn from and with all of you here and I look forward to future cooperation. Finally, I sincerely wish the Wealth and Society conference a great success! Thank you!