Sibos 2021: View From the Top with Qingsong Zhang, President, Agricultural Bank of China

Dear Mr. Yahweh Shah, dear Mr. Javier Tasso, distinguished guests, colleagues, ladies and gentlemen, I convey my sincere greetings from Beijing and Agricultural Bank of China. My appreciation goes to SWIFT for inviting me to this year's Sibos. Recharging global finance is a very important theme as empowering finance with digital technologies to better serve the economy becomes a focus of the global financial industry. Right now, COVID-19 is still ranging in the world, making it particularly important for financial institutions to play a greater role in supporting the recovery of the world economy through the use of new technologies, new methods, and new models. Today, I would like to focus on practices of the Chinese banking industry in empowering rural finance with digital technologies. Rural finance and financial inclusion have long been global concerns. Rural communities could benefit greatly from financial services, yet their financial needs are not fully satisfied. Ensuring their financial inclusion could enable well-distributed, robust, and sustainable economic growth and unlock the considerable economic potential of rural areas. The emergence of digital technologies has enabled a new development model for financial inclusion by providing new solutions to improve the quality and efficiency of financial services. Rural development has always been a focus of China's national strategies. In recent years, China has been implementing the digital strategy to increase the use of IT and internet in the countryside to support the financial needs of citizens and boost their incomes and spending power. Under the leadership of the Communist Party, the Chinese financial industry has also been making great efforts to innovate financial services to eliminate the urban-rural gap. I would like to share four aspects with you. Firstly, we have been increasing the coverage of financial services through digital banking channels. Residents in the Chinese countryside are scattered in vast areas, making it difficult for financial institutions to achieve full coverage with physical networks. The development of digital infrastructure in China has created favorable conditions to address these issues. As of now, more than 98% of China's villages are connected to optical fiber and a 4G network, and more than 290 million citizens in the countryside are connected to the internet. The digital divide between urban and rural areas has narrowed significantly. Building on this positive trend, the Chinese banking industry has been using fintech to create new channels to cover more clients, so that they can enjoy convenient financial services anytime and anywhere. Our bank, ABC, is committed to serving the agricultural sector. We have made tremendous efforts to form a multi-channel system including physical network, mobile banking, internet banking, and so on. By far, we have set up more than 22,000 physical outlets, the most extensive physical network covering the most remote areas in China. To better serve rural residents, we launched the rural version mobile app that covers 117 million clients in countries, ensuring that every township has ATMs and every village has POS machines. Moving forward, we will apply more digital technologies to upgrade channels, develop internet-based mobile financial services that fit into the rural context, and enhance multi-channel synergy. We will not only make our financial services more accessible but also more user-friendly. Secondly, we have been addressing financing difficulty through diversified products. For a long time, information asymmetry and collateral shortage are obstacles for financing rural regions. To address these issues, the Chinese banking industry employed new technologies such as big data and the internet of things to gather and integrate information and create new data-driven business models to meet the financial and non-financial needs of farmers and enterprises. Our bank launched online credit products for farmers and built a credit evaluation model by connecting industrial databases and gathering farm information village by village. These products enable remote contract signing and online credit repayment by using mobile credit application technology. This new model benefits over 3.45 million clients in the countryside. As agriculture becomes more industrialized, our bank introduced industrial chain financing products through information exchange with e-commerce platforms, trading markets, and leading agricultural businesses, providing automatic and convenient online financing services. Next, we will fully digitize microcredit products for farmers. We will further embed new technologies into the entire process of agricultural production, trading, processing, logistics, and warehousing to improve the adaptability of financial services along the industrial chain. Thirdly, we have been optimizing open banking services through digital scenarios. With the digital advancement in villages, the rural economic and social life has become more digitized, and open banking services have also continued to penetrate into the countryside. The Chinese banking industry has stepped up cooperation with various market entities such as non-bank financial institutions, e-commerce companies, and agricultural enterprises to create diverse agri-related digital scenarios to deepen the integration of financial services with the economic and social life in the countryside. Our bank is moving faster to build digital scenarios. For example, we introduced tailor-made smart financial scenarios in agricultural product markets, allowing SMEs to conduct payments and settlements, credit application, fund collection, and inventory management in real time. We also introduced over 9,800 county-level scenarios in smart hospitals, smart campuses, and smart business districts that cater to all aspects of real life. Under the guidance of regulators and the efforts of commercial banks, digital scenarios could be more diverse and in-depth in the future. Fourthly, we have been ensuring business sustainability by strengthening risk management. From practical experiences, due to the high inherent risk of agricultural production and the underdeveloped credit system, the overall risk of rural finance is relatively high, posing greater challenges to business sustainability. As IT application in the countryside increases, financial institutions are better equipped with new technologies and new methods to prevent and control agri-related financial risks. The Chinese banking industry is accelerating the development to design new intelligent risk control systems for farmers and various agri-related entities. Such systems attribute more importance to model-based decision-making than solely on expert experience and more towards automatic monitoring than manual identification. Our bank has established a digital risk control center and a central platform for monitoring credit risk. As a result, we realize risk prediction, control, and management during the full life cycle of credit businesses. In response to the new realities in the countryside, we are also actively developing innovative risk control techniques to improve the effectiveness of risk management. For example, we use blockchain to record and verify the integrity and uniqueness of agricultural information. We use satellite remote sensing for agricultural data collection and production monitoring. We use the internet of things to build a livestock monitoring system and carry out pilot schemes that use livestock as collateral. I believe that with the increasing application of fintech in rural finance, we can better control risks and make business more sustainable. Distinguished guests, ladies and gentlemen, at present, our society is entering a new stage marked by digital productivity, and the digital transformation of the financial industry is facing major historical opportunities. With the ongoing recovery of the global economy that has been hardly hit by the pandemic, the integration of digital technologies and financial services will further accelerate, and the role of digital finance in promoting high-quality economic development will become even more important. To this end, we should focus on the developments and changes of new technologies, enhance the application of fintech, and firmly seize opportunities brought by every wave of technological innovation. We should strengthen collaboration in areas such as the development and utilization of information, the harmonization of data standards, and the management of cyber security. We should safeguard the bottom line of risk management. We must make sure our financial activities should be proportional to risk control capabilities and strike a balance between innovation and business growth. Ladies and gentlemen, let us take this conference as an opportunity to move forward to afford a brighter future. Recharge finance with technology and jointly promote the recovery of the global economy. Finally, I wish the event a great success. Thank you very much for your attention.