Chapter 2 Who is Chen Zhiwu

In China, there are about 6,000 economists, but there are only about 100 economists who can publish papers in international mainstream academic journals, and Chen Zhiwu is undoubtedly one of the best. In February 2006, the Wall Street Telegraph published a list of the top ten Chinese economists.This striking list ranks academic influence as the most important evaluation indicator, followed by economic influence and social influence.Among the 10 economists on the list, Professor Chen Zhiwu is one of them. ◎Reporter: Common people in China think that economists are unfathomable. Even before you sat across from me today, I have been imagining your miraculous appearance in my heart. Is your daily life different from that of ordinary people?

Chen Zhiwu: There is no difference. I never feel that I am not an ordinary person.I am just an ordinary person with a very ordinary family background.I have no power, the only thing I can do is to do some academic research.I think that people who do academic research can experience life and feel society like an ordinary person, and the research on people and society will be more accurate and solid; Desire is normal. ◎Reporter: Many people may be thinking that an economist like you who can stand on the world stage must come from a famous family or a scholarly family. In fact, what kind of environment did you grow up in?

Chen Zhiwu: My family is in the countryside, and I grew up in Chaling, Hunan.Of course, speaking from my personal experience, I think that if a person's experience can be rich and colorful, it is very, very important for scholars who study society, study economy, study people, study culture and other disciplines. ◎Reporter: Do you think your experiences and life are colorful? Chen Zhiwu: I think it is very colorful.Of course, this may also be a very subjective judgment, because if I look back, I grew up in the countryside. I started to work in the fields every day when I was in the first grade of elementary school, or went to the mountains to cut firewood. At that time, I didn’t burn coal or anything else, I just burned firewood, so until I graduated from high school, that is, in 1978 and 1979, whenever I had time, I would either go to work in the fields or go up the mountain when I got home. chop wood.Of course, because of this, after I went to the United States in 1986, I went to Yale to study.Sometimes when I was walking on the streets of New York or in Manhattan, I thought, just a few years ago, I was still carrying firewood in those valleys in the countryside of Chaling. The changes in these years are really quite big.

Thinking about it now, I am a little bit scared, because there were really many things I didn't know at the time.When I applied for Yale, I chose the subject of finance. I said, what is finance?Without even any basic information, I walked through it step by step by myself. From Central South University, National University of Defense Technology to study in the United States, from studying computer and system engineering to transferring to finance, Chen Zhiwu was just an ordinary member of many Chinese students studying abroad.But these ordinary experiences eventually nurtured a world-renowned Chinese economist.Mr. Chen Zhiwu still has a lot of emotion when he recalls his school life back then.

Chen Zhiwu: Why is it that when I am studying finance now, one of the questions that strikes me the most is that at that time, for me, being able to spend an extra yuan a day can bring me enjoyment and improve my life , and the happiness of the whole person is much higher than if I spent an extra 1,000 yuan or even 5,000 yuan today.Why is this?I think the development of finance is very, very important in any society.Even if you don’t care about the development of finance, the development of the securities market, and how much it can help companies raise money, leaving these aside, it is of great significance to improve a person’s life.In other words what does it mean?If I could use some financial tools at that time to realize part of my expected future income and spend it in 1979, 1983, and 1982, it would be a very, very big contribution to my happiness throughout my entire life. help, isn't it?

But precisely because in Chinese society, even today, finance and securities are still very underdeveloped, so what will happen in the lives of each of us?It is the time when you are most able to spend money, most want to spend money, and get the most enjoyment and benefits through spending money, that is to say, when you are the youngest, and that time is exactly the time when you have the least money.And when you are 40 or 50 years old, you have finally accumulated your past income. When you have money and your income is relatively high, you will get older and older, so this is the last thing you want to spend money. When the enjoyment is the lowest, in this case, under the condition of underdeveloped finance and securities, a person cannot use this financial tool to make a smoother and mutually complementary arrangement for the entire consumption and income of a lifetime , so this is a situation that is very unreasonable and very unfavorable to the maximization of the overall happiness of each person in a lifetime.

After receiving a Ph.D. in economics from Yale University in 1990, Chen Zhiwu began his educational career, and taught at the University of Wisconsin-Madison and Ohio State University. He was promoted to associate professor of finance in 1997, and then to professor of finance in 1999 before returning to Yale. Taught at the University School of Management.Different from ordinary scholars, Chen Zhiwu also invests what he has learned.While concentrating on economics teaching and research, Chen Zhiwu founded the American Value Engine Company with his friends in 1998. ◎Reporter: Did it go smoothly when you first started your company?

Chen Zhiwu: It should be said that my first company was not very successful, but that company is still there. The value engine (value engine) probably started in 1997 and 1998. When the company was at the peak of the Internet, by 2001, it had probably spent six to seven million dollars. ◎Reporter: What kind of company is this? Chen Zhiwu: At first, we wanted to provide software and databases for analyzing stocks and controlling risks for different institutional investors and fund management companies, but later found it quite difficult to do this.So when we transitioned in 1999, we wanted to provide such analysis tools for the general public in the United States.As a result, the Internet bubble began to burst in 2000. Later, the source of funds was relatively tight, and then many people were laid off. So in the end, there were only four or five people until now.

◎Reporter: Until now.Is the company profitable now? Chen Zhiwu: Now there is a little profit, but not too much, it is very difficult.So I started working as a hedge fund in 2001. Hedge fund companies make more profits. This is a completely different business model.So this hedge fund is relatively successful among the two startups I have done. In 2001, Chen Zhiwu founded Wall Street Zebra Hedge Fund Company and served as the chief investment manager of Zebra Hedge Fund Company. From its establishment to the present, Zebra Fund has survived the turbulent days of many Wall Street fund companies after "9?11". 95% of the operations are realized by the mathematical model developed by Chen Zhiwu.

◎Reporter: What are your considerations for creating such a company? Chen Zhiwu: I think I have done so many years of research on the capital market, whether it is the stock market, the bond market, the futures bond market, or the futures market. In the end, I am still quite interested in putting these different theories into practice, and see what happens. What's going on.On the other hand, by starting a company, I can feel how entrepreneurs and managements in different companies face these problems and what are the challenges of these things.In this way, in turn, I can have a deeper understanding of economics and financial research issues.

◎Reporter: Maybe being a company is not the same as a model that is independently researched, because on the one hand, it needs to understand the market and data, and on the other hand, it needs to understand individuals, including your customers, and Everyone in the enterprise has a management system. Do you think there is any conflict between these two aspects? Chen Zhiwu: Of course there are many conflicts.For example, in academia, when we study financial economics theory, especially about the capital market, we often ignore the principal-agent relationship. There are not many previous studies on the changes or distortions of economic behavior and financial institutions, including investment and management behavior.So after doing these things myself, I feel that the role and influence of the principal-agent relationship in the real society and the real economy are omnipresent.Therefore, the principal-agent relationship in economics, especially in the theory of financial economics, has received far insufficient attention to this issue, far lower than the actual requirements. Because when we first started a hedge fund, it was the so-called market-centered hedge, that is to say, in the US stock market, I did not go long or short.And every time we buy a stock worth 1 yuan, we have to short another 1 yuan worth of stock, so we can find an ideal combination by combining these stocks that are bought or sold short on both sides, so that the risk of the two sides can be minimized. offset each other.The most ideal situation is that no matter whether the entire stock market goes up or down, up or down, the performance of our hedge funds should go up.That is, no matter what the market is, we should make money, which is our original goal. ◎Reporter: When you talk about this matter with your clients, do you think your role has changed from a scholar? Chen Zhiwu: Most of the time, I think there is no need to make too many conversions.Because the way we manage these funds is entirely based on the mathematical models we have studied.So when we explain these mathematical models, if I don't have an academic background, or if I can't put an academic perspective on it, it will be difficult to do this kind of persuasion.So in this sense, there is no conflict between these two roles.Because my method determines that it can only be done with a very strong academic background and theoretical background.In other words, we don't want to be a banker, or think that we can judge the future trend of the entire international financial market. We don't need to make these judgments, and we all use these models to help us make these judgments. While Chen Zhiwu is a scholar and a businessman, he has gradually gained fame in China since 2001. Chen Zhiwu began to express his unique views on almost all hot issues in China, such as real estate, RMB appreciation, private finance, and the gap between urban and rural areas.Chen Zhiwu used his extensive knowledge, quoted historical data from various countries for comprehensive comparison, and conducted in-depth analysis with a rigorous theoretical system.It was also from that year that his name was widely mentioned in China's financial and academic circles. ◎Reporter: Do you have any memory of when people began to call you an economist? Chen Zhiwu: I really can't think of this one. This may be mainly in China.Because in the United States, there is no difference between economists and economists, and they are called Economists in English.In this sense, people can basically say that I am an economist (economist), or a financialeconomist (financial economist) after I am a graduate student. ◎Reporter: There is a circulating version, that is, in July 2001, you saw a magazine on the plane, so you decided to go back to China to study the Chinese model. Is this the case? Chen Zhiwu: Yes.That journal let me see that when China's economy has developed to that stage, there are many phenomena and data, which should be very interesting for those who do economics and capital market research.Because in the past 28 years, in my opinion, China has been undergoing three major transformations.The first major transition is the transition from a planned economy to a market economy, the second major transition is the transition from an agricultural society to an industrial society, and the third major transition is the transition from a closed society to an open society.In the history of the world, different countries have experienced one or two of these three transitions, but transitions are taking place in all three major aspects at the same time, and such experiences are indeed not too many.So I think that the Chinese economy, Chinese society, and even the changes in Chinese politics and culture in the past two decades have provided a very, very good laboratory and a database for scholars, which can help We have some fundamental understanding of some disciplines related to people, society and economy, and enrich the entire knowledge base of human beings. ◎Reporter: More and more people know your theory and agree with your model. When is it? Chen Zhiwu: This may be when I was at Ohio State University, between 1995 and 1999. I did some research at that time and published more and more mainstream and best journals. At this time, People who are engaged in economics, especially finance, know more and more about me, including the United States, Japan, Europe, and Hong Kong, China. ◎Reporter: Then when you returned to China to study China's economic model, you kept publishing articles and comments.When was the first article published? Chen Zhiwu: The first article should have been published on New Fortune in December 2001.It was supposed to be about a securities infringement lawsuit.So now that I think about it, from December 2001 to 2002, most of the Chinese articles I wrote were published in "New Fortune" and "Caijing".Now it can be said that, like "New Fortune" and "Caijing", the level they represent is actually much higher than that of many professional journals of economics, so this can tell you that professional economics and social science are How high is China's level? Based on this, a very simple judgment can be made. Chen Zhiwu turned from a career of purely academic research to research on Chinese issues and legal issues.In just a few years, Chen Zhiwu has continuously discovered problems and proposed solutions, becoming a unique voice among Chinese economists. On August 10, 2004, Lang Xianping, a well-known domestic economist, delivered a speech titled "Greencool: Carnival in the Feast of National Retirement and Democracy Progress", accusing the chairman of many listed companies such as Kelon and the Greencool department In the process of retreating from the country and advancing from the people, Gu Chujun swept the country's wealth. On August 17, Gu Chujun formally submitted a lawsuit to the Hong Kong High Court, accusing Lang Xianping of committing a crime of defamation in his own name, which triggered the "Lang-Gu Controversy" that continues to this day.After that, Chen Zhiwu published many articles in response to Lang Xianping, expressing many views on the issue of "state-run" or "private-run". ◎Reporter: You haven't stayed in China for a long time. Do you have close contacts with domestic economists? Chen Zhiwu: Yes, very many. ◎Reporter: How is your relationship with Mr. Lang Xianping? Chen Zhiwu: I have nothing to do with him now. ◎Reporter: Why?Have you had a relationship before? Chen Zhiwu: We had contacts in the past.Because two years ago, I basically agreed with the phenomena he analyzed and studied on some issues such as "retirement of the country and advancement of the people".That is to say, this phenomenon exists very widely in all walks of life and any field in China.Now everyone is talking about academic corruption, medical corruption, etc., even these two fields that should not be corrupted and should be clean in any society, if such large-scale corruption begins, no matter it is the process of retreating from the country and advancing from the people, or any other It is not surprising that such and such problems arise in the process of involving economic interests.So the biggest difference between me and Lang Xianping lies in the root of these problems. This is the fundamental difference in our understanding. I think more about the people you arrested. Of course, many of them should be held accountable, punished, and sentenced, but these are the surface of the problem, not the root of the problem.If you want to solve these problems, the most fundamental thing is to make some fundamental adjustments in the institutional framework.In other words, if the entire process of retreating from the country and advancing from the people is itself opaque, and there is no NPC Standing Committee or other people's representative organizations to formally issue corresponding laws or regulations, and then directly interact with these power agencies through the media. With these supervision and accountability, it is not surprising that there are so many problems.Because this is determined by human nature, you have to be provided with so many loopholes and not take advantage of them, then you are irrational, right? Regarding this confrontation, Lang Xianping believes that there is a problem with the retreat of the country and the advancement of the people, because there has been a large amount of corruption embezzling state-owned assets.In this regard, Chen Zhiwu made a systematic rebuttal: What is the difference between case studies and academic research?Is state-owned shareholding a common phenomenon in the world?Are private enterprises inferior to state-owned enterprises?Regarding the key issues in this debate, Chen Zhiwu believes that only by retreating from the country and advancing from the people can Chinese enterprises develop the strongest international competitiveness. ◎Reporter: Do you alienate someone because of your different views? Chen Zhiwu: A difference of viewpoint will not alienate a person.But I think, as a Chinese who grew up in Hunan, I actually don't want anyone to take advantage of this emotion, a momentary emotion, or take advantage of such opportunities to make unprincipled actions for the sake of personal reputation. Something sensationalized or something like this manipulative operation.For example, because of this, he feels that he needs to re-focus on building and improving state-owned enterprises, instead of recognizing the fundamental problems in state-owned enterprises. ◎Reporter: Because it is the root cause. Chen Zhiwu: Yes.Therefore, especially for a scholar like him who has spent so many years studying corporate governance issues, he should not fail to see those conflicts of power and interests, if there is no relatively reliable independent judicial structure and independent regulatory structure , then in the end it is difficult to expect any meaningful improvement in corporate governance. ◎Reporter: Do you think a scholar should be objective and responsible to society? Chen Zhiwu: In other words, I think the things he did at that time excessively incited public opinion to serve his own interests. I think it was an irresponsible behavior for a person of his status. ◎Reporter: In your opinion, as a scholar, in what aspects should this social responsibility be reflected? Chen Zhiwu: It should be reflected in expressing it to the public and society based on your own most objective judgment, without reservation or influence of personal self-interest. ◎Reporter: As one of the top ten selected Chinese economists, what do you think is the responsibility of Chinese economists to China?Chen Zhiwu: The responsibility to China is first of all to sort out some misleading basic concepts and concepts in the past.In other words, because we used to be concerned about finance, about exploitation, about usury, about whether market transactions can create value, about business transactions, about whether businessmen can bring anything to society besides making money, etc. The concept should be sorted out in an all-round way.If this can be done, it will eliminate many misleading and destructive prejudices in the past for the development of Chinese society today and in the future, and lay a more solid foundation for the sustainable development of Chinese society in the future. At present, Mr. Chen Zhiwu focuses most of his research energy on the issues of market development and establishment of institutional mechanisms in the process of China's transformation. "What institutional mechanisms are necessary for the development of a market economy?" "What role does financial innovation play in the process of economic development?" These are the issues that Chen Zhiwu studies and pays attention to, and they are also issues that Chinese society in transition period urgently needs to solve. ◎Reporter: As ordinary people, it is easy to see the conclusions, data and some problems researched by economists and scholars, but they may not be able to clearly see the promotion of the results of their research to the entire social process effect.Could you please tell us what aspects of this performance? Chen Zhiwu: I can give a very simple example, such as the issue of usury. This misunderstanding is still very, very common today. In the past, we would say that usury is exploitation and a bad thing, so if this is the case, people who lend money to usurers must be bad people, so they should be defeated, right?However, some research and data I have collected, including data from the late Qing Dynasty and the Republic of China, clearly show that which province is more hostile and unfriendly to lenders, the higher the loan interest rate in that province.Because in the final analysis, any normal person who wants to release his hard-earned money to others will think about it. People are very low, why should I lend money to others to spend and lend it out?So the more everyone wants to crack down on usury and people who lend us money, the fewer people in the whole society are willing to lend money, and the less money will be supplied.In this way, the remaining funds that are willing to lend out will require higher interest.The direct result of cracking down on usury and lenders is not only not to lower the interest rate, but to make the usury higher.Today's misleading understanding is actually a very big and fundamental obstacle to the development of China's private finance. ◎Reporter: Whatever you do, you always think about other things. It seems that you are very curious about new things. Will you try other roles besides scholar and economist in the future? Chen Zhiwu: As far as I can imagine, I don't know much about it, because I like learning too much.If I can have a new understanding every day, whether it is about people, society, economy, or history, any day, if I can make new progress in my own understanding, I think that day is very happy of.So for a person like me, if there are no new understandings or new discoveries for many days in a row, I think the days are too boring. ◎Reporter: Do you have any expectations for yourself? Chen Zhiwu: To learn more about history, society, all aspects, including family, culture, people's preferences, etc., is my greatest expectation for myself.