Vice dean at prestigious finance school tells students not to be ashamed of their profession

The Shanghai finance educator's call for belief in finance, market, entreprenurs, and rules reverberates across a shaken industry.

In the past week, the death of a 30-year-old female investment banker, of the prestigious state-owned China International Capital Corporation (CICC), dominated China’s social media. While the circumstances surrounding her unfortunate death remain unclear, the tragedy sent shockwaves across the once high-flying finance sector.

With domestic and U.S. IPOs of Chinese companies coming to a halt after regulatory scrutiny at home and geopolitical tensions across the Pacific, leading underwriters have cut jobs in China. The largest state-owned financial conglomerates have reportedly imposed pay caps and even bonus clawbacks on investment bankers and fund managers. Less glamorous but still envied lenders, most of which are also owned by the state, have also cut salaries.

The fat cats, via their $24k-per-year-per-terminal ally, are understandably whining, but their reported $400,000 pay cap is not making the also-struggling commoners of the People’s Republic shed any tears. But a more fundamental shock to China’s Wall Street is that the moneyed class has been told by the Communist Party, unequivocally, that they “should abandon pretensions of being the ‘financial elite.’”

The country’s most privileged and best-compensated profession is now in a confidence crisis, so much so that they are told not to “feel ashamed but rather proud” by one of their teachers.

Finance is still a vital sector in the resource allocation of a market economy, including in rewarding entrepreneurs who take risks to innovate, says Li Feng, an accounting professor and vice dean of the renowned Shanghai Advanced Institute of Finance (SAIF) of Shanghai Jiao Tong University, at the recent commencement ceremony of the finance school known as Gaojin, or Advanced Finance, in China.

“Some financial practitioners, including some of our classmates and alumni, even develop a sense of professional shame,” Li said last week, in candid remarks that have been circulating in China. Below is a translation of Li’s speech, published on the WeChat blog of SAIF on July 6, 2024.

Dear Students and Teachers, Good afternoon!

I am very pleased to have the opportunity to participate in the 2024 Graduation Ceremony and Degree Awarding Ceremony. I sincerely congratulate all of you on completing your studies and embarking on a new journey in life. It is a great honor for me to speak as a representative of the faculty.

From today onwards, all of you officially become alumni of the Shanghai Advanced Institute of Finance, Shanghai Jiaotong University, and become permanent "Gaojin people." I have been pondering one question: How do we define "Gaojin people"? Besides having the same diplomas from Jiaotong University and Gaojin, what common values should Gaojin people possess?

Values are the most important dimension in defining an individual or a group: When faced with a thug rushing towards the school bus, when deciding whether to disclose important information, or when making a major acquisition decision, it is ultimately values that drive our actions and the consequences these actions have on society.

So, when Gaojin people here are gathering, chatting, or playing cards with friends, can they let others feel the value orientation and judgment characteristic of Gaojin? Here, I would like to share "several beliefs" which I think should be the values of Gaojin people:

1. Belief in the Role of Finance

At a time when we are unwaveringly promoting high-quality development and vigorously developing new productive forces, our country’s emphasis on technological innovation, especially hardcore technological innovation, has reached an unprecedented level. This is a very good phenomenon. Hardcore technology is an important driver for achieving Chinese-style modernization, and we all feel encouraged. However, we also see that in this process, some people begin to believe that the financial industry is worthless because finance does not seem to be hardcore technology. They believe that the financial industry is just a dispensable transaction cost. Some financial practitioners, including some of our classmates and alumni, even develop a sense of professional shame.

I think this view needs to be corrected urgently: All Gaojin alumni need to firmly believe in the role and importance of finance. This is because developing new quality productive forces cannot focus solely on hard technology while neglecting soft aspects. Besides hardcore technology, organizational design, scientific management, and various professional services (including financial services) are also indispensable components of developing new productive forces.

In 1776, Adam Smith observed in "The Wealth of Nations" that the division of labor can increase the labor productivity of pin manufacturing by hundreds of times, because the proficiency of workers improves, the transition time between tasks is reduced, and a large number of specialized machines are invented, all brought about by the division of labor. Similarly, hundreds of years ago, the innovative financing method of joint-stock companies greatly reduced the risk faced by individual shareholders in the high-risk business of maritime exploration, thus ushering in the age of great maritime exploration.

Therefore, Gaojin people must fully understand and firmly believe that finance is the lifeblood of the national economy and an important part of the country’s core competitiveness. Promoting the high-quality development of finance is an important support for comprehensively advancing China’s modernization and building a strong nation. As financial practitioners or those engaged in investment and financing in enterprises, we should not feel ashamed but rather proud.

2. Belief in the Role of Markets

Markets play an extremely important role in resource allocation: A large number of empirical studies show that financial markets have significant functions of price discovery and risk management. Even in the still-challenged Chinese capital market, many academic studies and practices have shown that the functions of price discovery and risk management also exist.

At the same time, we need to evaluate and examine the function of the market within an ecosystem. For example, the private equity market, secondary fund market, and secondary market constitute the entire investment and financing ecosystem. If some people only see the trading function of the secondary market and thus conclude that this market’s main role is capital turnover, they are ignoring the integrity of the investment and financing ecosystem, leading to a biased view. Therefore, the second point is that Gaojin people need to firmly believe in the role of the market and fully support the market's decisive role in resource allocation.

3. Belief in the Role of Entrepreneurs

It should be said that our country’s industrial policies have achieved great success. Taking the new energy vehicle sector as an example, our country’s forward-looking and systematic industrial policies have played an undeniable role in the development of our new energy industry. We see that the U.S. government’s "CHIPS and Science Act" introduced in 2022 is, to some extent, an imitation of our country’s industrial policies.

However, it is precisely at a time when our country’s industrial policies have achieved great success that we cannot ignore the important role of entrepreneurs behind companies like BYD and Leapmotor. In the face of great uncertainties, it is these outstanding entrepreneurs, like our alumni Zhu Jiangming, who spoke earlier, who bravely take on enormous risks, break conventions, and continuously innovate, contributing to human progress and becoming an important driving force for developing new quality productive forces.

Therefore, we must believe in the role of entrepreneurs, recognize their contributions to society, support them in obtaining reasonable returns for their risks, and protect the returns they earn.

4. Belief in the Role of Rules

The essence of finance is the resource allocation activity supported by contracts and technology. Whether it is asset and wealth management, trading securities on behalf of clients, or financial services such as deposits and loans, all are carried out through various contracts. The trust in contracts originates from mutual trust but is guaranteed by the rule of law.

Therefore, to become a financial powerhouse, we must maintain the spirit of contracts and uphold the authority of the rule of law on the basis of true, accurate, and complete information. I think this is the fourth value that all Gaojin people should have.

These are the common values that I, as a teacher at Gaojin, believe Gaojin people should possess. Whether you are working in government departments, regulatory bodies, financial institutions, or enterprises, whether in state-owned or private enterprises, I think we should all believe in the role of finance, the role of markets, the role of entrepreneurs, and the role of rules. With these beliefs and values, we can distinguish ourselves from graduates of other schools. This is my humble understanding, for your reference and mutual encouragement.

Finally, I once again congratulate you all on your graduation. Please visit the institute often, and if there is anything the institute can help with, please feel free to let us know. Thank you, everyone!