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Dr. Jiajun Xu Delivered Keynote Speech at UNDP Workshop
2017-09-01
Content introduction：
Dr.Jiajun Xu, Executive Deputy Director of the Center for New Structural Economics, delivered a keynote speech in the finance session of the Workshop on Low-Carbon Development and Financing Solutions—South-South Cooperation, hosted by the United Nations Development Programme China on August 28, 2017, in Beijing.
The workshop serves as part of efforts to support the exchange of experiences among developing countries and facilitate dialogue on development solutions from China. More than 100 government officials, representatives of leading financial institutions, research institutes and private sector companies participated in the workshop.
According to Dr. Xu, with the distribution of global savings and investment shifting from developed countries to developing countries, the latter, and China in particular, will become ever important capital providers. The key question ahead is how to build effective financial intermediaries in developing countries to channel savings to productive investments.
However, two problems account for the difficulty in narrowing the financing gap: Official Development Assistance is too small and piece meal; and the global capital market is pro-cyclical and suffers from short-termism, and hence it is unwilling and unable to invest in high-risk and long-term green transformation projects.
Giventhe looming financing gap and abundant capital flows, Dr. Xu emphasized the strategic role of development banks in promoting green structural transformation. First, development banks can rely on sovereign credit worthiness to raise funds with a lower borrowing cost from the high-liquidity capital markets and then channel them to invest in long-term projects to over comematurity mismatch. Second, development banks can serve as entrepreneurial investors to bring low-carbon technology through high-risk deployment stage toward low-risk diffusion where new market space can be created. Third, development banks can send a reputable signal to mitigate policy risks in greenenergy investments, as regulatory cycle is often shorter than investment cycle required for demonstrating commercial viability.