天美传媒

Professor Franklin Allen tells us about his decades of research into the Chinese financial system and the main challenges facing the finance sector today

The 鈥溾�� performed by China since the Communist Party took over the country in 1949 is staggering. In just 70 years, the country has transformed from an isolated, impoverished nation into one with an economy that is already significantly larger than the US in terms (PPP) and tipped to in terms of market exchange rates.

Professor of Finance & Economics Franklin Allen, who acted as Interim Dean of the Business School for one year from September 2023, has devoted much of his recent research to this phenomenal success. Through a series of papers looking at the Chinese stock market, the country鈥檚 financial institutions and financial systems more widely, he is trying to understand 鈥渙ne of the most successful growth stories in history鈥�.

鈥淭his is an interest that started quite a long time ago in the early 2000s,鈥� he says. 鈥淐hina had grown a lot by 2000 but nothing like it did over the next 20 years. Today, if you use PPP, it鈥檚 the biggest economy in the world by about 25 percent.鈥�

Between 2000 and 2021, China鈥檚 GDP soared from USD 1.2 trillion to USD 18 trillion, and it now accounts for around 18 per cent of the global economy. The speed of this economic growth has come as a surprise to many because China doesn鈥檛 operate in the same way as other major economic powers, such as the US, notes Professor Allen.

Before the 2008 financial crisis, it was widely believed that, for an emerging country to establish a successful economy, it should follow a set of recommendations known as the . But these neoliberal policies, which included limiting state involvement in the economy and advocated for the free market, were not wholly adopted by China.

鈥淭he notion that if emerging countries put in place good laws and good institutions, like in the US and Europe, then they would be very successful doesn鈥檛 fit with China鈥檚 story,鈥� Professor Allen says.聽

Green finance聽

Beyond his work on the Chinese economy, as Executive Director of the School鈥檚 Brevan Howard Centre for Financial Analysis, Professor Allen is responsible for strengthening ties with other disciplines, including engineering and computational finance. The Centre鈥檚 research focus, which spans financial stability and financial regulation, comparative financial systems and designing new financial structures, also includes environment protection, and Professor Allen believes dealing with green finance is an important challenge for the sector.

鈥淭here seems to be a desire among many investors, particularly in Europe but increasingly in the US and elsewhere, to give financing to green firms,鈥� he says, adding that the problem with this is the difficulty in defining 鈥済reen鈥� and how to measure it.聽

鈥淭ypically, green finance has a bad reputation because of what people loosely refer to as greenwashing. There are a lot of things which you could claim has something to do with green finance but don鈥檛 really do any good in terms of combatting climate change or even comply with the .鈥澛�

It is the responsibility of finance academics, he says, to look at how to make green finance compliant through instruments, such as green bonds, that make the pay off on the bonds contingent on acting to improve climate change. This means that if a firm doesn鈥檛 reduce its CO2 emissions, for example, it must pay a lot more on the bond than if it succeeds.聽

Future leaders

But it isn鈥檛 only having the right tools, the finance sector also needs the right people to come up with groundbreaking ideas. Professor Allen argues that to successfully develop green financial policies, the sector will need to attract young talent who may otherwise be tempted to take up careers in tech or entrepreneurship.聽

鈥淥ver the past 15 years or so, the sector鈥檚 been shrinking, and banks have been laying people off. At some point that will come to an end, and they鈥檙e going to have to start recruiting in a major way to ensure they hire the brightest and best.鈥�

As a member of faculty at Imperial Business School, an integral part of Professor Allen鈥檚 work is teaching the world鈥檚 future business leaders 鈥� something he considers 鈥渁 real pleasure鈥�. And this positivity is certainly appreciated by his 天美传媒. In , Business School student Joanne Long named Professor Allen as one of her favourite professors, describing him as 鈥渃onsiderate, always articulating concepts in a clear manner and willing to answer our questions no matter how small it is in a patient and kind way.鈥�

Professor Allen is looking forward to this side of the Business School鈥檚 operation expanding, with the upcoming launch of its undergraduate programme.

鈥淲e can do even better than we have done, so far,鈥� Professor Allen says. 鈥淭he undergraduate programme that we鈥檙e introducing is very important because we鈥檒l be able to attract even more excellent 天美传媒 who will go on to achieve great things.鈥�

Find out more about Professor Franklin Allen's work

This article was updated in August 2024 to reflect Professor Franklin Allen's role as Interim Dean of Imperial Business School