The development of China’s capital market, especially the securities market, has been marked by significant instability. The market often experiences sharp declines triggered by various factors, with rapid drops from peak levels and only brief periods of sustained highs. Numerous regulatory documents and frequent personnel changes in supervisory bodies have created an environment where actions easily fall into areas of dispute, stifling the intended vitality of the capital markets. Despite the persistent underperformance and stagnation of China’s capital markets, this condition is often overlooked or even tolerated by society.
In contrast, the U.S. capital markets, while not without risks or major events, maintain a high level of activity and continue to evolve. The markets’ vitality remains largely unaffected, their development uninterrupted, and their position within the broader economy unshaken. Major indices in the U.S. have remained at historically high levels over extended periods. Despite frequent skepticism and widespread short-selling, U.S. equity indices continue to reach new highs, most notably, the Dow Jones Industrial Average is now approaching the 50,000-point milestone.
Perhaps more relevant to China is the way in which the U.S. capital markets, as a foundational component of its economic infrastructure, work in tandem with fiscal and monetary policy. In practice, increased liquidity tends to correlate with rising equity indices, and the capital markets have played a highly effective role in supporting the "debt-driven economy" model.
Following the 2008–2009 Wall Street financial crisis, the U.S. initiated its first phase of quantitative easing (QE1). The Federal Reserve alone purchased approximately USD 1.725 trillion in bond assets, including U.S. Treasuries and mortgage-backed securities (MBS). As a result, the liquidity crisis was effectively mitigated through the capital markets. The S&P 500 Index (SPY), which bottomed out at around 676 points in March 2009, began to rebound and had risen to approximately 1,150 points by March 2010, an increase of over 70%. In the second phase (QE2), the Fed purchased an additional USD 600 billion in long-term Treasury securities. The equity market continued its upward momentum, with the S&P 500 climbing from around 1,180 points in November 2010 to about 1,320 points by June 2011, an increase of roughly 12%. Then came QE3, in which the Fed launched an open-ended asset purchase program, acting as the largest market maker. It committed to buying USD 40 billion in MBS and USD 45 billion in Treasuries each month. During this period, the S&P 500 rose steadily from around 1,430 points to nearly 2,000 points by October 2014, a gain of approximately 40%. In the fourth phase (QE4), during the COVID-19 pandemic, the Fed introduced an unprecedented unlimited QE policy, purchasing both government and corporate bonds. This triggered a sharp rebound in the S&P 500, which surged from a low of 2,237 points in March 2020 to nearly 3,800 points by the end of that year, an increase of about 70%. Since then, U.S. equities have continued their upward trajectory. As of 2025, the S&P 500 is now approaching 6,500 points, repeatedly hitting new all-time highs.
ANBOUND has consistently emphasized that during China’s 15th Five-Year Plan period, the development of the capital market should be a strategic priority for the country. It constitutes a critical piece of social infrastructure for the future and is essential for addressing both current and long-term economic realities in China. Structural weaknesses must also be addressed. Ultimately, the country must commit fully to ensuring success.
Given the national policy emphasis on capital market development, the question arises: how should society at large and local governments effectively coordinate and advance this agenda? I believe that the key is promoting and developing productive finance.
In the past, the concept of productive services has been widely recognized. When it comes to productive finance, it refers to a financial model that utilizes financial tools and resource allocation to directly or indirectly support real economic activities. Its goal is to drive economic growth, employment, technological advancement, and improvements in total factor productivity (TFP), rather than simply pursuing short-term financial returns or speculative gains. Previously, a report by the Institute of World Economics and Politics at the Chinese Academy of Social Sciences (CASS) also touched on the concept of "productive finance". However, that research placed particular emphasis on production activities, focusing on the micro-level dynamics of the “financing–investment–repayment” cycle. From the perspective of addressing current economic realities, I am of the opinion that "productive finance" should place greater emphasis on revitalizing the real economy and promoting sustained economic growth. In other words, the overarching objective of productive finance should be to serve the real economy and support technological development by advancing capital market development, expanding the range of financial instruments, fostering economic dynamism, mitigating and hedging risks, and ultimately stabilizing or enhancing economic growth.
As China undergoes economic transition, bond issuance and overall debt levels have reached record highs and are expected to keep rising, potentially marking the shift toward a fully debt-driven economy. In this context, relying solely on conventional or administrative measures to offset debt, or expecting to “reduce debt with more debt”, is neither sufficient nor sustainable. Instead, greater reliance should be placed on financial markets. A vibrant and well-developed capital market, along with diversified financial instruments, should be leveraged to manage and refinance debt through bond issuance. In this regard, the development of national capital markets, as well as the active participation of local governments and large state-owned enterprises, is essential. By promoting and advancing productive finance, a constructive and resilient financial system can be built, one that mitigates financial risks, offsets default risks, and reduces the likelihood of debt crises or large-scale defaults.
Productive finance is, in essence, a form of macro-level systemic integration, an engine of economic growth that can serve as a key lever for driving economic expansion.
As for China’s state-owned enterprise (SOE) reform, one practical and strategic direction is to transform SOEs from managing specific projects into productive financial groups. These groups would focus on preserving and increasing the value of state-owned assets, while leveraging investment and capital to drive the development of the real economy and technological innovation.
When it comes to "going global" for these Chinese enterprises, the key lies in the services and political support provided by business consortia. Local governments can establish productive financial groups to create capital linkages, form and manage business consortia, and offer cross-border support and services to Chinese enterprises, both state-owned and private, as they expand overseas. In the current market situation in the country, where state-owned enterprises hold a dominant position and private firms face limited opportunities, productive finance can serve as a central mechanism for resource allocation and help close the gap between the public and private sectors. By resolving competitive tensions and integrating both sides, it can channel efforts into a unified force, working together to build a vibrant and unified national market.
Productive finance, too, is crucial for urban vitalization, as its robust development can aggregate and mobilize significant resources, turning urban renewal into a source of sustained momentum. When finance thrives, the economy thrives. The prosperity of the financial sector has always been a driver of economic prosperity, and this is a fundamental principle of economic history.
Therefore, the development and promotion of productive finance is fundamentally a significant strategic policy. In the context of China, its importance is arguably on par with that of the Belt and Road Initiative (BRI). It is important to recognize that productive finance constitutes a social system, much like how Wall Street represents a social system in the United States. This social system should not be confused with the existing scattered productive finance activities. Productive finance, as a strategic and macro-systemic concept, primarily involves constructive roles played by the government and SOEs, with the goal of targeted market development and economic prosperity. In contrast, productive finance activities refer to the discrete, pre-existing financial transactions and related activities that occur within the market.
Final analysis conclusion:
From the perspective of China's economy during the 15th Five-Year Plan period, advancing productive finance represents a critical macro-level policy lever. The question of “Where is China’s Wall Street?” is not merely about establishing a stock exchange; it is fundamentally about building a broader social and institutional system and creating an effective platform. This is a major macroeconomic undertaking that concerns both current and future strategic opportunities and is closely tied to the country's long-term goal of achieving its economic objectives.
