When He Ping returned to China in early 2008, it was on the eve of the global financial crisis. Having completed his Doctor in Philosophy (PhD) in economics at the University of Pennsylvania and taught in the United States (US), he returned not only for family reasons but with a mission: “I wanted to use the knowledge I learned from the US to actually contribute to the development of China.” A scholar shaped by global experience returns to help reshape China’s financial future That global lens, informed by both academic theory and practical exposure, continues to shape his work. As Associate Dean of the School of Economics and Management at Tsinghua University and director of the Center for Global Trade and Industrial Competitiveness, He focuses on how China can navigate the difficult intersection of macroeconomic policy, financial innovation, and regulatory transformation—while staying rooted in national values. Monetary stimulus is not a cure-all in an economy facing structural and external headwinds Much of He’s work revolves around understanding the boundaries of monetary policy. In his joint research on real liquidity and monetary expansion, he and his co-authors question the conventional view that central banks can always rely on monetary easing to stimulate demand. “The size of the monetary supply is limited… it has to be consistent with the real economy and fiscal support,” he explained. While developed economies like the US pursued prolonged quantitative easing with mixed consequences, China faces a different challenge. Despite calls by some economists for a big monetary push to counter the current slowdown, He is cautious. “If the slowdown is not caused by insufficient demand, then money supply will not be able to boost demand,” he said. China’s slowdown, he argues, is more deeply rooted in structural constraints: an ageing population, overinvestment in real estate and infrastructure, and rising debt at both household and municipal levels. Monetary tools, in this context, may do more harm than good. “Banks do not have a lot of incentive to lend to over-leveraged firms,” he added, pointing to the limitations of credit transmission when private balance sheets are already strained. Risks in the system run deep—and are amplified by interbank and off-balance-sheet exposures He’s research on systemic banking risk has particular relevance to China’s current environment. His contagion-based network theory focuses on how interbank connections can magnify risk. “Because banks are interconnected… the risk could be contagious across banks,” he explained. This is especially critical when the economy slows and non-performing loans begin to rise. In such an environment, banks may restrict lending out of fear that problems at one institution could spread to others through shared exposures or counterparty defaults. Alongside this formal network risk is the shadow banking sector, which He sees as having contributed significantly to overinvestment and asset bubbles—particularly in real estate. “The pricing was too high… many investments did not have sustainable returns,” he said. Wealth management products (WMPs) and trust vehicles enabled off-balance-sheet financing, but much of it was ultimately backed by highly leveraged developers and local governments. In response, the government introduced the “three red lines” policy and began cracking down on shadow financing in 2018. The result was painful but necessary. “We have to go through that process to get the bubble gone,” he said. “The cost is non-performing loans… we are digesting that little by little.” China leads in financial digitalisation but proceeds cautiously with blockchain and CBDCs While China’s banking system may still be state-led and structurally rigid, it has emerged as one of the most digitally advanced financial systems in the world. According to He, cloud computing and artificial intelligence are now widely adopted across financial institutions. “AI is already replacing a lot of the labour force… in the banking system,” he observed. But blockchain presents more challenges than solutions—at least in its decentralised form. “Blockchain is kind of complicated in China,” He noted, adding that speculation, moral hazard, and illicit fundraising through initial coin offerings (ICOs) led to a regulatory ban on private digital currencies. China’s central bank digital currency (CBDC), the digital renminbi (e-RMB), is therefore highly centralised. “It does not completely use blockchain… it’s not the kind of conventional cryptocurrency,” he clarified. Instead, it is issued by the People’s Bank of China (PBoC) and distributed via commercial banks, keeping the state firmly in control of monetary issuance and circulation. However, He sees value in stablecoins, especially those pegged to the RMB. “They can allow participants in international trade to pay through the internet without any banks or SWIFT,” he said. Unlike CBDCs, which can circumvent capital controls and create international friction, stablecoins—particularly those issued by regulated commercial institutions—may offer a more politically neutral path to RMB internationalisation Supervisory reforms reflect the changing shape of financial services In 2023, China consolidated its banking, insurance and financial regulation agencies into a new financial regulatory bureau, National Financial Regulatory Administration (NFRA), while returning macroprudential oversight to the PBoC. This move, He explained, reflects deeper changes in the structure of the industry itself. “We now have more and more controlling group companies… offering banking, insurance, and wealth management services together,” he said. Universal banking is becoming the norm, requiring regulators to manage cross-sector risks and conflicts of interest. The transformation from institutional silos to integrated service providers calls for a modernised supervisory approach. As China evolves from a manufacturing- and investment-led economy to one driven by innovation and services, its financial system must adapt as well. Technology finance must replace the old banking-dominant model China’s new growth priorities—centred around advanced manufacturing, green energy, digital platforms, and biotech—require more than traditional bank lending. “The old model is government-dominant, banking-dominant… that is not enough for technology innovation,” He warned. Instead, he calls for the development of a new financial ecosystem tailored to innovation: deeper venture capital (VC) and private equity (PE) markets, better exit mechanisms for tech investors, specialised technology banks, and more public-private collaboration. “We need to completely transform the existing financial system… to make it more technology-friendly, innovation-friendly,” he said, referencing new policy frameworks on “technology finance” that the government is beginning to introduce. This shift will be gradual, but it is essential for aligning capital allocation with China’s broader transformation goals—from factory-led exports to value-added innovation within global value chains. Global turbulence ahead: China must reduce reliance on the US dollar He identified the potential devaluation of the US dollar as one of the most urgent external risks facing China’s financial system. “The market has a huge pressure on dollar devaluation,” he warned. “It’s going to have a huge impact on the global financial system… and China’s financial system as well.” China, he argues, must prepare by diversifying its foreign exchange reserves, adopting hedging tools, and reducing its currency linkage to the dollar. “We should reduce our exposure to the dollar… be more flexible… connected to other currencies,” he advised, highlighting Europe, Russia, Latin America, and Southeast Asia as increasingly important trade and financial partners. This shift is also geopolitical. As China's global economic footprint expands, so does its vulnerability to currency volatility and financial sanctions. Reducing dependence on the dollar is not just a financial strategy—it is a matter of national resilience. A steady hand in uncertain times Professor He Ping presents a financial philosophy that blends caution with ambition. He is neither a monetary hawk nor a cheerleader for unfettered innovation. Rather, he advocates a model of reform that is adaptive, grounded in empirical research and awareness of China’s institutional realities. He’s roadmap for China’s financial future includes resisting pressure for over-expansionary policy, controlling systemic risk, leveraging digital transformation responsibly, and building a capital market system that supports national innovation goals. It also includes preparing for external disruptions by de-risking global currency exposure and diversifying international partnerships. For He, the path forward is clear: evolve China’s financial system in step with its economic transition—while upholding national values, protecting stability and adapting to a more fragmented and competitive global landscape.
