There are some who express it as just another policy from China that is as trivial as a leak in a faucet. Therefore, I feel I need to provide a bit more detailed explanation. Ultimately, it can be said that there is a certain intention from China. It feels like everything was already prepared according to various scenarios. This policy is not just a short-term measure; it’s a continuous one, like a cereal system. It is true that there is overheating in the field, and there is certainly short-term overheating, but there are various other factors that make it difficult to view it that way. There are changes in the ecosystem of the Chinese capital market. 

Hello, this is Lee. Today, I have a very special guest. We have CEO Shin Young-kwan, who operates the Shanghai class, with us. Hello. Hello. I usually host broadcasts quite often, so I tend to be less nervous. However, today I am feeling a bit anxious.

I think I'm going to hear a really interesting story, so it's been a while. It's exciting, but I'm a bit nervous. Could you please briefly introduce yourself, since this is your first time on our channel? 

Yes, I am Shin Yang-kwan. Until recently, I served as the CEO of Mirae Asset Global Investments in Shanghai for about 15 years. Before that, I worked in the China business division at Samsung Life Insurance. In total, I've been involved in the Chinese capital market for exactly 20 years, and I've lived there for 20 years as well. Additionally, I've been in this industry for 32 years now.

Your experience is impressive, and being the CEO of Mirae Asset in Shanghai is quite significant. I feel very fortunate to have you here today, especially at a time like this.

As interest in China is heating up, I feel that it's meaningful to have this conversation now. I've heard that we have a very famous friend from China, Congressman Park Seok-jung, who has some connection with us. Yes, I refer to him as Park Seok-jung, but I usually call him Park-kun. His first job was at our Future-Se China branch, and I worked with him back then. He is quite well-known. 

Regarding China, I used to view it very critically and pessimistically until recently. However, due to the recent stimulus policies, I'm unsure how much I should change my perspective. Today, I plan to discuss various topics with the representative, and for those watching, I would like to elaborate a bit. In my opinion, in Korea...

중국에 대한 전문가 중 한 분을 우연히 모시게 되었습니다. 여러분이 중국에 대한 시각을 갖는 데 정말 큰 도움이 될 것이라고 말씀드리며 시작해보면 좋을 것 같습니다. 첫 번째 질문은 지난주 화요일과 목요일에 발표된 부양책에 대한 소감입니다. 제가 그날 서울에 들어오는 길이었어요. 화요일 오전에 어떤 행사에 참석했다가 고향으로 가는 길에 뉴스를 접하게 되었습니다. 사실 비행기를 탈까 고민했었습니다. 가지 말까 하다가 약속도 있어서 바로 갔고요. 그런데 오는 비행기에서 정리를 하면서 다음 날 정리를 하게 되었는데, 사실 저는 32년, 아니 30년 넘게...

I saw China, and that day I felt a bit of a chill. Yes, it was that kind of chill. Before we started, the representative mentioned feeling chills too, and I felt chills as well. Oh, really? Yes, but if you just look at this as a macroeconomic or stimulus measure, you might not feel that level of impact. Also, including today, the Chinese market has risen over the past few days, but that’s not why I mentioned this. The significance of this policy is not just about how much it lowers and how much consumption is stimulated; it’s not at that level. In my view, China’s fiscal and monetary policies, along with the rules of the capital market, can play a game-changing role. Yes, that was my first thought. It was like a comprehensive gift set. Yes, exactly. So I...

I'm currently doing YouTube, and as soon as I got back that day, I immediately filmed with my team and sent it out. I mentioned that I would tone it down, and it turned out to be a comprehensive gift set. This is truly unprecedented. However, over the past few days, reflecting on the feelings I've received and the follow-up work and policies, I feel that my judgment was correct. My interpretation is that from Seoul's perspective, I hadn't watched YouTube much in the past few days, but my impression is that some people express it as just another policy akin to a urine leak in China. So now, regarding our Lee Ho-seok Academy, I thought I should provide a bit more detailed explanation. That's good. To elaborate further, the first point is...

Now we have finance, real estate, and capital markets, right? So I just took the first part and expressed it as wealthy in finance. When we look at the finance sector, I think everyone knows a lot about it since they’ve heard it many times. They lowered the reserve requirement ratio and then reduced the repo rate, which is the 7-day repo rate. They said they would lower interest rates, but they didn’t specify when the market would react. However, it was just the day after, on the 29th, that it happened. So, the representative mentioned that on the 24th, and then the focus was on the Central Political Bureau meeting on the 26th, but there were also significant follow-up actions that continued to emerge in between and afterward. So, this is a series of events that should be viewed as a whole, right?

However, the reason we express it as a set is that instead of focusing on the fact that the three leaders have emerged from China, we need to consider why they came out, what significance this holds, what the implied meaning is, and how this will impact finance. We need predictions about these aspects. In fact, when we talk about the U.S. Federal Reserve, we interpret hundreds of meanings based on just one word. However, when it comes to China's fiscal or monetary policy, everyone tends to take a black-and-white approach. They either think it will happen or it won't, which leads to a lack of excitement. For example, it feels a bit like playing local neighborhood soccer—there's no real interest. Yes, that's right. This is clear, and it reflects the somewhat rough or less sophisticated aspects of the Chinese government up until now.

I felt that we had learned everything we could from the United States. I observed how the U.S. interest rates could move three different aspects of the economy. I also understood how these changes impact them. During the stage of closely examining this, as soon as the U.S. lowered its interest rates, China began to operate this systemically. So, the whole system moved; it wasn't just individual movements from the financial sectors. Therefore, the feeling I had that day, which I described earlier as chilling, was that everything is already prepared behind the scenes. I confirmed this on the 25th regarding the financial authority's discussion about the capital increase for Tier 1 and Tier 2, where they are raising Tier 1 capital to six.

On the 26th, there was a meeting of the Central Political Bureau regarding the bank's capital increase. There are so many points that came out of that meeting, so to summarize briefly, this information is not widely known. While it is somewhat recognized, the interpretations are lacking. They tend to place less importance on certain aspects. The discussions that took place on the 26th in the Politburo were truly a culmination of thoughts, but no matter how much someone like Zhu reads the report, it should be considered that all decisions have already been finalized. The Central Political Bureau meeting, as you know, involves about 30 people around the table, and when including those from the religious sector, there are over 50 participants. In that meeting, it is not just a top-down discussion; there has been a bottom-up approach prior to this, especially after the US interest rates were lowered, which has initiated movement.

The beginning had a consensus, and then the policies that came out that day were a sort of interim summary. However, now there's an interpretation that doing it in September holds significance. That interpretation is also correct. Typically, when it comes to economic matters in central politics, it's appropriate to do it in April, July, and December. But the fact that it was done in September means that those involved in Korea usually don't do it but had to because of urgency. What this indicates is that they didn't consider the U.S. interest rates. We viewed this as a separate, isolated incident, but since interest rates are rising, I believe the direction of money has changed. Therefore, the current trends in foreign capital are important. This is not just my opinion; over the past few days, I've been closely watching how foreign capital is moving, how the Hong Kong market is behaving, and how northbound funds are moving.

I saw everything, but from what I can tell, in the past few days, about 160 billion to 170 billion RMB has flowed into Northbound trading daily. This influx of funds comes through Hong Kong, specifically through Star Connect, which means that there has been talk of Huagangtong and Guangtong. You might have heard of those terms. It's been a long time since I've heard about China, right? So, this has been a continuous suppression in China for a while, and the funds that have come in over the past three to four days amount to around 800 billion RMB. So, it seems like about 100 billion dollars has entered the market. Yes, it seems like more than 100 billion dollars has come in, right? You calculated that quickly!

But what's even scarier than that is the incredible volume we saw today. As you saw today, it hit the highest trading volume ever. Just before I came in, I noticed that it has risen by 88% today. Now, while the overall index is significant, in my opinion, the Shenzhen and Shanghai start-up boards are more relevant. One of them has risen by about 22%, and it seems like the other one has also gone up. This means that one index has risen by 20%, which indicates that all stocks have reached their upper limits. The important thing is not just this rise, but the explanation for why this money has flowed in. So, I've been confirming this on the first day and the second day, and it continues.

I'm saying this, but later on, there's something about the Pibo 2 A sound. So, it seems that Asia is rolling towards the A side, and this has already been verified. In Hong Kong, however, since it's somewhat linked to the U.S., isn't it easier for funds leaving the U.S. to flow into Hong Kong? They can exit at any time. The reason why they eventually flow into the mainland is likely to find stocks that are not available there. Ah, yes, because of that, the market is probably reacting now, and even on the mainland. But I was debating whether to enter the market last weekend, thinking, Could it really be necessary to this extent? However, over the weekend, I spoke with a friend who runs a PIA at China's largest securities firm. We've known each other for over 20 years, and he works at the largest branch in Shanghai. What do we call that in Korean?

The branch manager, however, said that I talked with a couple of friends about it. To put it simply, the money that is supposed to come in is not coming in. What this means is that last week, the hedge funds were moving money around, and in the meantime, everything got stuck. The money I’m referring to is related to China, particularly the meetings held on the 27th, 28th, and 29th, where the CSRC and other regulatory bodies in China had discussions. There might not be many people following this closely, but I went to the CSRC website, downloaded everything, and looked through it all. Originally, on the 24th, what Chairman Wu Qing mentioned, as well as what President Xi Jinping said on the 26th during the Politburo meeting, all connects. This can ultimately be interpreted as China's intention.

You may ask, but it feels like everything was already prepared according to different scenarios. So, if I take this, it could lead to exaggerated policies. I've been in the investment field for over 30 years, and when emotions get involved, it often leads to disaster. So, I keep saying that this might not be the case. However, compared to any policies that have come out so far, this is not just a short-term play; it’s a systematic approach. Because of that, everyone is wondering what’s waiting behind this. Today, I saw some strategists from major securities firms talking, and they mentioned that this still needs to be verified. That’s correct; it needs to be verified. While discussing with the representative, I was saying that, well, those people...

It's not just something you see occasionally on business trips; right now, there are PIs operating the largest funds in that area, and then there are the branches. This isn't about macro; rather, it's about large pools of capital and the branches that cater to individual investors, like retail investors. From observing the reactions of those two individuals, I felt that while there is indeed overheating—short-term overheating is certainly true—there are various interpretations regarding the stock market that make it difficult to view it that way. I believe it is the responsibility of someone like me, who has been in the capital markets for a long time, to interpret this. It's not just a matter of right or wrong; rather, these trends are changing something, and as I mentioned earlier, they are transforming the ecosystem of the Chinese capital markets. This transformation has been learned from the United States and Japan.

I learned from ATF that these people are fighting against inflation in the U.S., while China needs to fight against deflation. However, the preparation for this has been ongoing for the past three to four years. Initially, they seemed to be unaware, but since last year, they have made sufficient preparations in this regard. I believe that now we are seeing each of these strategies emerging and the cards being played. As I reflect on what you have explained, I feel that my instinct is telling me something. It seems like things have completely changed, and it's quite significant. However, I am considering various perspectives, so I might be wrong. I’m currently looking into this from different angles, but it feels like things are moving forward, and that’s the impression I’m getting, right?

Am I right? However, among the things you mentioned, what has been bothering me and what I think is really important is the expression learned from America. I believe this is very significant because, from China's perspective, they might have thought, Why are these kids in Korea staying up all night watching this? They analyze what Chairman Powell says during the FOMC meetings, and it even influences investment decisions. People in companies and even real estate investors are deciding whether or not to invest based on that. The level of influence this has is indeed substantial. Recently, I heard an interesting point about how we can measure a person's success after they are born; it seems to be based on having a larger loudspeaker.

A person has succeeded, which means they have influence. However, when looking at it from that perspective, one might think, What is that? when observing China. But if you think about it, what they are doing is quite strange. From my perspective, I could do this too, and I’m sure others have had the same thought. However, when you look at the content, it’s all about the capital market, monetary policy, and fiscal policy, all of which directly mirror the United States. The reason I was so shocked by this is that they are truly good at observing and imitating what others do. For instance, they just replicate the Tesla factory. I thought they could do that in manufacturing, but they have also copied the financial aspects, and that seems a bit frightening to me. The second point I want to make is that there is a significant difference between China and the United States.

What do you see in finance? Finance, finance. As for semiconductors, this has already been underway for the past four to five years. You've probably heard a lot about Huawei. Finance is difficult to copy because of the dollar; it will be nearly impossible for the U.S. to replicate that. Also, the system known as the FMC, and from what I've seen, when looking at the Chinese economy from South Korea, those who study Western economics or haven't properly studied the Chinese economy yet may perceive it as somewhat inefficient. And that's true. Yes, yes. So, what I was surprised about is that this time the People's Bank of China intervened in the capital market. In other words, the tools of intervention include things like super facilities and re-lending. Many people have been discussing this, so I...

I won't explain that. The super party literally goes to the central bank with the bonds or stocks they hold, and if they get collateralized, they can receive cash. There are about 3 trillion to 9 trillion, right? Oh, what is that? 500 billion, right? 5 trillion, 5 trillion, and the standby funds are 5 trillion, correct? But now, when the central bank governor mentioned 1 trillion 500 billion, that is a significantly different statement. The central bank governor doesn't usually talk like this. Expectations regarding predictions, these aspects are quite complex to read between the lines. I've been studying Chinese for 40 years, but understanding the meaning behind the lines is very complicated. This time, what keeps coming out of China is something they referred to as Baihua. Yes, Xinbai, that term Baihua, what does it mean? In the past...

We learned about the concept of Baekhwamun, which means to communicate in simpler terms that the common people can understand. This means that when speaking, one should express ideas in a way that is easy for the public to comprehend. For instance, if we talk about 3 trillion or 5 trillion, when we combine these figures, it amounts to 450 trillion. The central bank's governor has expressed the intention to pursue this plan, which reflects his thoughts on the matter. However, there hasn't been any interpretation regarding this yet. The scale of 450 trillion is not something trivial; it’s significant. It wasn't just a casual statement about what he would do if things went well. Rather, he indicated that if the effects are positive, then he would proceed. So, the mention of 3 trillion or 5 trillion was based on the potential positive outcomes, meaning both figures relate to the direct capital of the central bank.

They are saying they will implement an injection. What does that mean? Well, what has been the biggest issue we have faced in South Korea? It's the lack of domestic demand. We have been overly reliant on exports, and since exports are not doing well due to the situation with the U.S., it’s become increasingly difficult, and the real estate market is also facing challenges. This has been the logic behind it, right? Yes, that’s correct. 

Now, regarding domestic demand, this is a domestic stimulus policy. The focus is not on the capital market. So, how are we going to boost domestic demand? We cannot raise real estate prices too much. If we increase property prices in first-tier and second-tier cities, it will ruin the lives of young people. Therefore, we will only provide enough funds to keep the real estate market from collapsing. The recent surge in real estate stocks, in my opinion, is just a brief moment of recovery after being suppressed for so long. I don’t see it as a significant change. What is currently emerging here...

Everyone talks about how there are 220 million stock investors and how many accounts there are. However, only about 50 million accounts are active. So, with these 50 million accounts, the market capitalization reached 82 trillion RMB today, and since it rose by 10%, it must have approached 90 trillion RMB. In US dollars, that would be around 12 to 13 trillion dollars. So, that's the scale of the amount, but the only ones who can directly benefit from this wealth effect are those in the capital market. This doesn't mean I'm trying to create a bubble. If I were trying to create a bubble by pouring money into it, I probably wouldn't be saying this. It seems like this is going to take too long, but to put it simply, I've set up defensive measures for that over the past year.

What I saw over the months was that while it's good to support and invest money into the capital market, if it creates another bubble like in 2015 or 2016, it will just go up to 5,000 and then drop again in a month. I don't view it that way, so I'm still interpreting this situation. At least, when I talk with my friends in China, they also discuss it privately. However, since everyone is cautious, there are risks involved. But I think, given the current free situation, it's okay to speak openly about what we used to be very careful about in the past. It's beneficial for our investors. This isn't something that will end in the short term, so it's not about quickly getting in and out. Therefore, it's absolutely not a matter of saying whether to invest or not immediately. The problem is...

This is about how the system needs to change as it progresses, and we are preparing for the transformation in the capital market. At the core of this preparation is the CSRC's chief, Wu Qing. I have personally known Wu Qing for over ten years, as I have worked with him in a professional capacity. He was the chief deputy mayor, and his previous experience is quite significant for us. He served as the district chief and was the deputy director and then the director at the CSRC. He was also the district chief in Honggu, where the infamous lunchbox bomb incident occurred. Since then, we have been in contact. When we talk about the CSRC, we are essentially referring to the Financial Supervisory Service, which has a concept similar to that of a commission. He held positions such as director and section chief there. Last year, he...

When there was talk of going to the U.S., I was very excited because there has been a commentary from C. Including this person, the last nine individuals were all from banks. They are all former executives or chairpersons of banks. What this means is that in the upper echelons of China's capital market, especially regarding the stock market, the personnel involved have been primarily associated with banks. This indicates that the capital market has been viewed as an extension of lending, rather than as an investment market. They saw it as a form of lending, rather than investment. However, this individual has continuously argued that there needs to be a focus on investment as well. Of course, the funding aspect has been primarily driven by speculation in the stock market. This seems natural because those in leadership positions might have believed that was appropriate for that era.

There were no leaders who had experience in stocks or assets back then. The stock market opened in 1992, so people in high-ranking positions at banks would go and learn for about two to three years. However, finance and investment cannot be mastered in just two to three years. This has had an impact until now, leading to policies that have often been inconsistent. When this person entered the market, there was a significant surge, but he was nicknamed the butcher of brokerage firms. He had this nickname because he had addressed a lot of illegal activities in securities firms and had cleaned them up. Since he had that experience, he understood the market well. At this point, the significance of his entry into the market is clear, and if he had been followed continuously, we would be in a different situation now.

The policy, then, is how to bring this catalyst into the capital market and how this catalyst should be utilized, ensuring that it doesn't end up being wasted or flowing out like garbage. So, I know someone who understands this well. The significance of what was discussed that day is important, but the follow-up policies that come after are also crucial. However, it seems that our juniors and colleagues here in Yeouido have not yet fully followed up on this. Important discussions are continuously emerging, so let me clarify a bit. Typically, when the central bank intervenes in the capital market, it might happen subtly behind the scenes, but there are no overt actions like this. Just think about it; it feels unpleasant when the KOSPI isn't performing well.

The Governor of the Bank of Korea came out and said, Wait a minute, why are the stocks falling like this? We need to intervene. How much is it? 450 trillion? That's absurd. It's something unimaginable that is happening in China, and we are not fully aware of its significance or intensity. Even earlier, Baek-hwa expressed it in simple terms, asking, Did you understand me correctly? It felt like that. However, this is not about raising stock prices; there was a background to it. As mentioned earlier, President Wu Qing also spoke about this, indicating that it is happening in a situation where preparations are in place. And if this ends up being just a temporary rise followed by a drop, like a bubble, we will know that there will be many repercussions. And...

I can somewhat relate to the idea that investing in stocks rather than real estate could actually help stimulate domestic consumption. However, I have two points of skepticism. First, even if the stock prices rise, as you mentioned, there are about 50 million accounts; I wonder if individuals will actually be able to make money from this and if it will lead to increased consumption. That’s one concern I have. Second, while there may be a desire to avoid a bubble, I think it’s hard to prevent one. If prices rise too quickly, it could lead to a situation where no one ends up making money, and it could turn into a problematic scenario.

미국, 일본 카피 끝낸 중국! 180도 달라졌습니다⎮신형관 중국자본시장연구소 대표

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