BlackRock: Countries seeking economic prosperity need strong financial markets in addition to banks

Larry Fink, Chairman of BlackRock, said that the US public stock and bond market provides more than 70% of financing for non-financial companies, a higher percentage than any other country in the world. In contrast, Chinese companies rely on bank loans to provide 65% of their financing. Fink considered this difference to be a crucial lesson in modern economic history, as countries seeking prosperity need not only strong banking systems, but also strong capital markets.

Fink added that capital markets continue to grow rapidly, and that increased investment in these markets creates a positive economic cycle, boosting the growth of companies and countries and generating wealth for millions of people.

Fink pointed out that capital markets play an important role in addressing two of the biggest economic challenges of the mid-21st century: secure retirement and infrastructure.

Fink explained that secure retirement, which was more affordable thirty years ago, has now become more complicated due to increasing life expectancy. To solve this problem, capital markets can provide the money needed for retirement, if supported by governments and companies.

The second challenge is infrastructure. As countries move toward decarbonization and digitalization of their economies, there is increasing demand for all types of infrastructure, from communications networks to new energy generation. In recent decades, we have seen unprecedented demand for energy infrastructure, as countries seek to achieve the twin goals of transitioning to low-carbon energy sources and ensuring energy security. Capital markets can help achieve these goals at a reasonable cost.

Despite the anti-capitalist tendencies in recent politics, Fink emphasized that most world leaders still recognize the obvious truth: no other force can lift more people out of poverty or improve the quality of life like capitalism. Capitalism remains the economic model best able to realize our highest hopes for financial freedom, for individuals and for countries alike.