guo shuqing : promoting the new development paradigm and preventing the resurgence of financial risks speech by mr guo shuqing, party secretary and deputy governor of the people's bank of china and cbirc chairman, at the 13th lujiazui forum, shanghai, 10 june 2021. * * * secretary li qiang, mayor gong zheng, governoryi gang, chairman yi huiman, ladies and gentlemen, friends, good morning! it gives me great pleasure to attend the lujiazui forum again to exchange views with colleagues from home and abroad on topics of common interest. shanghai is a vibrant city and has witnessed miracles taking place one after another. since last year, shanghai has, in accordance with general secretary xi jinping ’ s instructions, advanced epidemic prevention and economic and social development in a coordinated manner, with greater strides made for further reform and opening - up and new progress achieved in becoming an international financial center. the city remained third in the latest global financial center index ( gfci ), with its rating very close to the second. during the 14th five - year plan period, financial regulators in china will make concerted efforts with shanghai as well as chinese and foreign financial institutions to deepen financial reforms and promote financial openness in shanghai. since 2020, in response to the unprecedentd pandemic, developed countries have all launched super - stimulus packages. such fiscal expansion is accompanied by ultra - loose monetary policy. the us federal reserve has nearly doubled the size of its balance sheet, and that of the ecb and the bank of japan expanded by more than a half and a quarter, respectively. these extraordinary measures have helped stabilize markets and confidence in the short run, but their negative side effects would befall other countries. first, financial assets and property markets in developed countries have seen significant price increases. in particular, stock markets reached record high very quickly. it ’ s just like climbing steep mountains : it ’ s hard to go up, but even harder to go down. second, inflation has come as if it were scheduled, at a higher rate than was expected by our us and european counterparts. as for how long it will last, it doesn ’ t seem that short as many experts predicted. third, when fiscal spending has been largely supported by money printing, it is like an airplane getting stuck in a spinning vortex : it would be very hard for the airplane to get out easily on its own. before 2008, the fed balance sheet was less than about

from the peak after rectification. efforts must be made to prevent financial institutions from over - leveraged and complex cross - sector financial products, and put an end to all kinds of “ loan - like ” products before they emerge. the new asset management rules must be implemented effectively to ensure successful overhaul of existing asset management products. third, we must firmly crack down on illegal public offerings of securities. currently, there are a large number of public equity products disguised as private equity ones in the financial markets. many of the illegal fund - raising cases were essentially illegal public offerings of securities which were issued to unqualified investors, with the number of investors exceeding the 200 limit, thereby causing severe damages to the market, communities and individuals. upon discovering such disguised offerings, punishments must be imposed in accordance with the law, and the issuers and related parties must be held liable for fraudulent offering, financial fraud or false disclosure. fourth, effective steps must be taken to prevent financial derivatives investment risks. in the previous cases, many retail investors invested in financial derivatives and incurred great losses. in mature financial markets, however, institutional investors are the key players in financial derivatives, because they are not suitable for unqualified individuals. given uncontrollable and even unpredictable factors, the prices of financial derivatives are highly volatile and therefore investors need to be professionally competent and highly risk tolerant. speculation in derivatives by common retail investors is equivalent to disguised gambling, and they are sure to suffer losses. investors that speculate in currency, gold or other commodity futures hardly have any chance of getting rich, as they are set to pay the same heavy price as those betting that property prices will never fall. fifth, we must remain vigilant against ponzi schemes. nowadays, we have seen a resurgence of investment frauds that promise high returns and could be disguised as financial technology or internet finance, but they are illegal fund - raising in essence. all individuals should bear in mind that there is no such thing as a free lunch and that principal - guaranteed investments 3 / 4 bis central bankers'speeches offering high returns are financial fraud. they need to be more alert, beware of risks and improve capability to identify risks, and stay away from illegal financial activities. we hope that the participants here at this forum, while offering insightful views, can patiently help promote such basic financial literacy. many thanks to the moderator for his kind introduction and support. i wish this forum a complete success! may new progresses be made in