Wall Street depends on Fleet Street

• Source: Global Times
• [23:45 September 16 2009]
• Comments

Illustration: Liu Rui

By Ding Gang

A whole year has passed since parents everywhere were shocked by the story of Sanlu's poisonous milk powder, and Jian Guangzhou, the reporter with the Shanghai-based Oriental Post, who broke this story, has just won the "2009 Shanghai May 1 Labor Medal." He also took first prize at the 19th China News Awards for his reports on the story.

At fi rst, I thought Jian's report about the Sanlu scandal was a typical example of financial journalism. However, after I read some articles on how to build Shanghai into an international financial center, I had a different understanding of reports of this category.

At present, the discussions about how to build Shanghai into an international financial center mostly focus on the economic or financial aspects. Funds, investment destination, capital markets and information flow are the four most important areas. Many experts say that only after Shanghai  becomes competitive in these four aspects can it become a global financial center.

From the media angle, what do we mean by the competitiveness of information flow? It is closely related to timeliness, openness, accuracy and transparency. In order to be competitive, supervision organizations of the capital market must continuously improve their monitoring capability and enterprises in the market must continuously improve the transparency of information. This process must be aided by the media.

The competition in the modern capital market is actually a kind of information competition. In the capital markets, the information possessed by buyers and sellers is often asymmetrical.

As happened before the fi nancial crisis, the seller will always do everything possible to lure buyers. For instance, they will develop complicated derivative securities that are difficult for anyone to fully understand in order to sell junk bonds. The buyer will inevitably be deceived due to the lack of relevant information.

As the guardian of a fair market, news media should reduce this information asymmetry. As Chen Zhiwu, an economist of Chinese origin, said, without the supervision of news media to reduce information asymmetry, the market will ultimately be forced to close.

Take a look at the financial centers that are currently globally competitive.

All of them have done better than their opponents in reducing information asymmetry. The fi nancial media in these centers all take advantage of more open information in order to explore stories more deeply and properly analyze global fi nance.

Since the financial crisis broke out, people have been continually discussing whether Wall Street will decline. Not long ago, I discussed this issue with a friend, who is an experienced fi nancial reporter in New York. My friend asked me, "If you had a lot of money and were trying to fi nd stocks  to invest in, which place would be the best choice?" Maybe it is still Wall Street. "Because you can get from our newspapers more and more useful information about the stock market in New York."

This might be taken as self-praise, but his emphasis on information has another meaning. Wall Street's status as the financial center of the world also benefi ts from "more and more useful" information.

No fi nancial market in the world is perfect, not even Wall Street. After the financial crisis started, people in the American financial media asked: Why the media wasn't a cool observer of the market? Why was there so much media hype of ultimately worthless products? Why didn't the media send out stronger warnings before the fi nancial crisis erupted?

Obviously there are many reasons, one of which is that media neglected to probe as deeply as they should have. This was related both to wide scale deceit by public relations companies and the businesses themselves, as well as the lack of skills among some fi nancial reporters. For the media that have focused their attention on Wall Street, the key to future success still lies in continuous improvement of their investigative skills.

A financial center that can attract more funds and give investors more confi dence is inseparable from reporters with these kinds of investigative abilities.

In this sense, in order to build Shanghai into a global financial center, we need not only one Jian Guangzhou, but also a large number of reporters like him and a media environment that supports them.

The author is a senior editor of the People's Daily