Stage 7 Expanded Reading
In this stage you are expected to broaden your horizon into the topic of the lecture.Please read the following article carefully.
Financial Globalization:Retreat or Reset?
With the ramifications of the 2008 financial crisis still unfolding and new regulations being implemented,two starkly different futures are possible.In one,the world remains on its current trajectory,with little financial market development and subdued capital flows.Although such an outcome may reduce the risk of a future financial crisis,slower economic growth may become the new normal.An alternative scenario would involve a“reset”of the financial system that corrects past excesses while enabling financial deepening and globalization to resume.
Scenario 1:Financial Globalization Retreats
If current trends continue,the value of financial assets relative to GDP would remain flat or even decline by 2020.This would reflect ongoing deleveraging of the household,corporate,and financial sectors in advanced economies,despite a continuing rise in government debt.It would also reflect no further financial deepening in developing countries.The retrenchment of global banks could lead to a loss of competition and expertise in the financial sectors of some smaller countries,driving up the cost of borrowing,and bank lending would be a smaller source of financing in advanced countries.Without robust cross-border capital flows or the presence of securitization and corporate bond markets to provide alternative channels,borrowers in these regions could face a credit crunch.
In this scenario,cross-border capital flows would not regain their pre-crisis peak for many years.Europe would stay on its current course—with no breakup,but only slow progress toward a banking union framework—and the continent’s cross-border activity would continue to wane.Banks would focus on domestic activities and enter only those geographies where they have a clear competitive advantage.Investors would find limited options for entering potentially high-growth emerging economies; foreign capital would shy away from shallow markets in these countries that lack transparency and enforcement.Savers around the world would find it more difficult to diversify their portfolios geographically,potentially harming returns.
Sharp regional differences could emerge in the availability of capital.Some regions with high savings rates would find themselves with surplus capital,and a shortage of good investment opportunities in these countries could potentially result in lower returns for investors and savers.By contrast,other countries(including some advanced economies and many emerging markets)would find capital in short supply,constraining growth.
The crisis underscored the need for greater prudence and stability.But in fighting the last battle,it is easy to lose sight of new hazards that lie ahead.The current path runs the risk of choking off the financing needed for investment in business expansion,infrastructure,housing,R&D,and education.In a more credit-constrained world,all companies would need to consider how and where to raise capital.
Scenario 2:Financial Globalization Resets
With the right actions by financial institutions and policy makers,the world could take a more balanced approach to financial market development and globalization that would support economic growth.This scenario hinges on putting in place a solid global regulatory framework to correct the excesses of the pre-crisis years.This includes well-capitalized banks,a clear plan for cross-border resolution and recovery,improved macroprudential supervision,and mutual confidence and cooperation among national regulators.A revitalized system would include healthy competition among an array of financial intermediaries and institutions that serve both borrowers and savers.Foreign capital would flow to where there are investment needs.
In this scenario,countries would pursue opportunities for sustainable financial deepening,such as the expansion of corporate bond markets.In many countries,even the largest companies get most of their debt funding from banks rather than capital markets.But as banks reduce leverage and in some cases need to reduce the size of their balance sheets,shifting some of this credit demand to bond markets would be beneficial.Our calculations suggest there is room for corporate bond markets to grow by more than $1 trillion if large companies in advanced economies were to shift 60 percent of their debt funding to bonds—and significant additional growth could come from emerging markets.This is only a rough estimate of the scale of the opportunity,and a shift of this magnitude would take years to play out.However,we can already see that corporate bond issuance has increased significantly in all regions of the world since the financial crisis.
Developing nations also have significant room to deepen their financial markets.On average,equity market capitalization is equivalent to 44 percent of GDP in developing countries,compared with 85 percent in advanced economies.Credit to households and debt of corporations combined is only 76 percent of GDP in emerging markets,compared with 146 percent of GDP in advanced economies.McKinsey research has estimated that small and medium-sized enterprises(SMEs)in emerging markets face a $2 trillion credit gap,and 2.5 billion adults around the world lack access to banking services.If developing nations converge to the average financial depth currently seen in advanced economies over the next two decades,their financial assets could grow from $43 trillion today to more than $125 trillion by 2020.
Cross-border capital flows would post steady growth in this scenario.But instead of reopening the floodgates of volatile short-term lending and interbank lending,portfolio flows of equity and bond purchases and FDI would become larger components of international capital flows,enhancing stability.Investors would be able to gain much greater exposure to growth and diversification in the emerging world.
This alternative scenario could result in a system that provides financing for innovation and investment without sacrificing stability—if policy makers can balance these two goals.Without the proper regulatory framework in place,a return to rapid growth in financial assets and cross-border capital flows leaves the world vulnerable to the risk of yet another crisis—and all the collateral damage that would entail.
(Source:adapted from“Financial Globalization:Retreat or Reset?”on www.mckinsey.com.)
Task 1:Reading Comprehension Questions
The following questions are asked based on the above article.Please go back to the article and find the answers.
1.How does the article describe the current global capital markets?
2.What would happen to advanced economies,emerging economies and smaller countries respectively if financial globalization retreated?
3.Why would cross-border capital flows keep shrinking if financial globalization retreated?
4.Who would find it more difficult to raise funds?
5.What should be done in order to reset financial globalization?
6.What do many companies do to satisfy their financing needs?
7.What should developing countries do in order to grow their financial assets?
8.What would encourage an increasing capital flow into the emerging economies?
9.How do advanced economies differ from developing countries in the structure of financial assets?
10.What seems to be a dilemma for policy makers?
Task 2:Paraphrasing
Explain in English the underlined words and expressions in the context of the above article.
1.With the ramifications of the 2008 financial crisis still unfolding and new regulations being implemented,two starkly different futures are possible.
2.This would reflect ongoing deleveraging of the household,corporate,and financial sectors in advanced economies,despite a continuing rise in government debt.
3.Without robust cross-border capital flows or the presence of securitization and corporate bond markets to provide alternative channels,borrowers in these regions could face a credit crunch.
4.Foreign capital would shy away from shallow markets in these countries that lack transparency and enforcement.Savers around the world would find it more difficult to diversify their portfolios geographically,potentially harming returns.
5.The current path runs the risk of choking off the financing needed for investment in business expansion,infrastructure,housing,R&D,and education.
6.This scenario hinges on putting in place a solid global regulatory framework to correct the excesses of the pre-crisis years.
7.As banks reduce leverage and in some cases need to reduce the size of their balance sheets,shifting some of this credit demand to corporate bond markets would be beneficial.
8.If developing nations converge to the average financial depth currently seen in advanced economies over the next two decades,their financial assets could grow from $43 trillion today to more than $125 trillion by 2020.
9.Instead of reopening the floodgates of volatile short-term lending and interbank lending,portfolio flows of equity and bond purchases and FDI would become larger components of international capital flows.
10.Without the proper regulatory framework in place,a return to rapid growth in financial assets and cross-border capital flows leaves the world vulnerable to the risk of yet another crisis—and all the collateral damage that would entail.
Task 3:Translation
Read the article again and translate it into Chinese.
阅读文章参考译文：
金融全球化：倒退还是重启？
随着2008年金融危机后续影响的持续发酵以及各项新规的逐步实施，未来将呈现出两种截然不同的发展态势：其一，世界在原有的轨道上继续运行，金融市场发展缓慢，资本流动减速，尽管这会降低未来爆发金融危机的风险，但也意味着经济增长放缓将成为新常态；其二，金融体系重新构建，以纠正过往的过度投机行为，继续深化金融全球化。
情形一：金融全球化倒退
如果按照现有的趋势继续发展，到2020年，金融资产价值与国内生产总值的比值将保持不变，甚至有可能下降。尽管政府债务将持续上升，但是，发达经济体的家庭企业以及金融部门将继续去杠杆化。同时，发展中国家的深化金融改革将难以维系。全球银行数量的缩减，将导致一些小国的金融部门竞争和专长的流失，从而引发借贷成本上升，发达国家的银行借贷继而也会萎缩。如果没有庞大的跨境资本流动或资产证券化和企业债券市场来提供替代渠道，那么，这些地区的借款人将面临信贷危机。
在此情形之下，跨境资本流动在未来多年内，都难以恢复到危机前的峰值水平。欧洲将变化不大：虽然不会发生分裂，但也只是朝着银行一体化缓慢前行，欧洲大陆的跨境活动也将持续衰落。银行将专注于国内业务，但只涉足具有明显竞争优势的地区。投资者进入有潜力的高增长型新兴经济体的选择并不多。外资也会由于这些国家透明度不高、执法力度不强，而退出这些不规范的市场。全世界的储户将难以进行区域投资多样化，因此将导致收益受损。
地区的巨大差异将体现在获取资本上。一些储蓄率高的地区会发现，本地资本过多而优质投资机会过少，因此会减少投资者和储户的投资回报。与此相反，其他国家（包括一些发达经济体和许多新兴市场国家）将面临资金短缺，经济增长受阻。
本轮危机凸显采取更加审慎和稳定政策的重要性。但是，人们在进行最后一搏时，往往会忽略潜在的新风险。目前，现有路径存在的风险是，用于商业扩张、基础设施、房地产、研发及教育的融资渠道已被阻断。在信用进一步紧缩的世界，所有公司都必须考虑筹资方式与资金来源。
情形二：金融全球化重启
如果金融机构和决策者采取正确的措施，世界将以比较平稳的步调迈向金融市场发展和全球化，这将有助于经济增长。情形二的关键所在是，需要将一个强有力的全球监管体制落实到位，以纠正危机爆发前的过度投机行为。这个体制应该包括资本雄厚的银行、明确的跨境解决与复原计划、强大的宏观审慎监管，以及各国监管部门之间的互信互助。要想让金融体系重获新生，作为借贷双方媒介的金融中介机构就必须营造良性竞争，这样外国资本才能流向需要投资的地方。
在此情形之下，国家将追求可持续金融深化的机会，譬如企业债券市场的扩张。在许多国家，甚至那些最大的公司都不是从资本市场而是从银行获取债务融资。但是，由于银行的去杠杆化以及银行有时需要缩减资产负债表的规模，因此，企业把部分信贷需求转移到债券市场是合理的。我们的计算表明，如果发达国家的大公司把它们债务融资的60%转向债券，那么，公司债券市场的规模将增加到1万亿美元以上，伴随而来的在新兴市场上的增长则更为可观。这仅仅是一个粗略的估算，而且这种巨变要等到多年之后方可实现。不过，我们已经看到，自金融危机爆发以来，世界各地的公司债券发行均呈显著增长态势。
对于发展中国家，深化金融市场改革同样存在巨大的空间。平均而言，发展中国家股票市场的资本总额相当于国内生产总值的44%，而发达国家的这一比例为85%。新兴市场国家的家庭借贷和公司债务总额只占国内生产总值的76%，而发达国家的这一比例为146%。据麦肯锡的研究估计，新兴市场国家的中小企业面临2万亿美元的信贷缺口，全球25亿成年人享受不到银行服务。如果发展中国家的金融在未来二十年能发展到发达国家目前的平均水平，那么，发展中国家的金融资产将由现在的43万亿美元增加到2020年125万亿美元以上。
在这种情况下，跨境资本流动将稳步增长。但是，不要把波动性强的短期信贷和银行同业拆借的闸门打开。只有这样，股票、债券以及外国直接投资才能成为国际资本流动的中坚力量，因此有利于金融稳定。投资者也将能够从新兴市场国家的经济增长与多元化方面，获得更多的投资机会。
第二种情形可以催生出新的体制，既不牺牲金融稳定，还能为创新和与投资活动提供资金支持，但前提是决策者能够平衡好这两个目标。如果没有严格的监管制度落实到位，那么，回归到金融资产与跨境资本流动的飞速增长，就会让这个世界重蹈覆辙，投资者血本无归。