Reform is a parvenu topic in China; it seems that external pressure is a good way to spur reform in China, especially in recent years or months, how do you see this external influences? What actually to weigh big changes between China and the world?
In my view, you know China is always trying to balance, a reform on one hand, and stability, the stability of the country on the other hand, stability of socially, culturally, politically economically, financially, you know they're always you know aspiring for a stable in the world, so that's the tension, so I will say that yes, the country and the officials in the country respond to needs or drive for reform from the outside world, but I would say even more importantly, they respond to reform from inside the country much more than from the outside world, that is a topic that is not well covered, not well understood, because clearly what a lot of the media talks about is the needs or the pressure by the outside world, outside of the country, you know to China, but I would think and it's my experience that the internal pressures and the internal needs for reform are bigger than outside.
So think about the financial markets, you know everyone talks about the rest of the world is putting pressure on China to reform the financial markets, it is more important the needs inside China to reform the financial markets than the outside forces, because China has the second largest economy of the world, cannot continue to be that without very modern financial markets, whether it's the banking market, or the you know the equity market, or the bond market or the foreign exchange market, you know that flexibility, that ability to allocate capital on a bottom-up basis, as opposed to top-down, now that is going to become even more important in the future, because many of the industries that China wants to promote, such as technology, consumer goods, you know healthcare, you know the consumer staples and like right, all of those industries are towers of allocation of capital from the private sector, from the public markets, you know publically traded equities or public bonds, then it is to estate on lending, you know by state-owned banks, so that's why I am very hopeful, I'm very optimistic that the capital markets of China will develop much more rapidly than people think, because the economy is gonna need those markets much more in the future that has needed them in the past.
You are very strong advocate on ESG. How do you persuade people that ESG is an essential requirement, not window dressing, going forward?
I think what happens is that ESG investing is part of a much bigger trend in the world, the sustainability of all of our institutions in overtime, whether is political, cultural, religious, economic, or financial institutions, the societies that we live in, are demanding that those institutions become accountable to do them, and understand the benefit that they're providing to society as opposed to harms that they're providing to society, and we see that all over.
We in the investment industry, we need to become more accountable to what are the benefits that investing is providing to society, what are the harms that are creating to society, whether is an environmental harm or a social harm or a governance harm, you know these institutions needs to be more accountable, so therefore you know in my mind, this is about the preservation of the way of life, and the preservation of the economic systems that we have built in the world, if we don't make the economic and financial system, particularly the capital allocation system accountable to the benefits of society, and understand the harm that they create, this system is not going last a long time.
China is still early on, and the same thing Chinese companies are still early on in measuring the ESG factors in their companies, measuring and managing their social policies, their environmental policies and all of that, so this is how we come in, we come in and we provide ratings of companies for them to understand what they're doing well, what they're not doing well, we sell them these ratings to investors, so the investors understand what are the benefits of investing in that company, what are the risks that can come. so if you have a company that is heavily polluting the environment, that's a risk, that over time is gonna come back to be a detriment to that company, so we want investors to understand that, so we are in the nexus of that process between investors and the companies that are looking for capital, and providing the tools to analyze what are the factors in which investors should be making decisions on, and how are the companies being managed for their long-term benefits of their shareholders their clients.