Distinguished Guests, Ladies and Gentlemen:

Good morning!

First of all, I sincerely appreciate the invitation by the organizers to attend Yabult Entrepreneurs Forum and deliver a keynote speech. Today, in a world inundated with over production and excessive information, how can we distill truth from mountains of data and differentiate viewpoints and expectations with nothing in common? For those of you who are already well informed, I do not intend to talk of today's economy, but rather I’d like to share my understanding over our common concern – tomorrow, or "expectations".

Expectations are always part of human life. Back to the early stage of history, mankind had curiosity as well as reverence and anxiety towards future. Therefore, prophets who claimed to be capable of forecasting the future were worshiped, such as prophets in the Old Testament, King Wen, the writer of the Book of Changes, and Nostradamus, the writer of The Prophecies, to name just a few. Though, with the advance of civilization and technology, human gained more knowledge about the law of nature and the evolution of history and started to cast doubt over prophecies into the far future by so-called prophets or future-tellers. The modern world still relies heavily on expectations, which play a significant role in the decision-making of economic players on investment, production and consumption. Particularly, with further development in financial sector and virtual economy, expectations, in some cases, are even decisive in investment decision-making.

In fact, economists discovered the significance of expectations to economic behaviors a long time ago. Keynes, in The General Theory of Employment, Interest and Money, clearly stated the effect of expectations and took it as the foundation of his macro-economic theories. In the 1970s, researchers headed by Robert Lucas established the Rational Expectation School, which emphatically stated the influence of expectations on economic participants, and took a further step to put forward the hypothesis that governmental macroeconomic policies are ineffective under the premise of rational expectations, which overturned Keynes’ theories. Robert Lucas was awarded the 1995 Nobel Economic Prize, followed by another three of his school. In 2002, due to the successful integration of psychology into expectation analysis, Daniel Kahneman, pioneer in behavioral economics, was again awarded Noble Prize, who argued persuasively that many seemingly rational behaviors are actually irrational. For example, some investors, when facing losses, become "risk seekers" rather than "risk averters". The repeated winning of Nobel Prize by Rational Expectation School proves the strong position of expectations in economic theories.

In a traditional society dominated by real economy, consumption and production are somewhat rigid and time-lagging due to constraint from demand, orders and sunk cost. Therefore, the change of expectations tends not to result in strong economic volatility. But in recent years, with the booming of various sectors such as finance, real estate and commodities, and the rapid growth of financial markets in each country, expectations have seen an amplified impact on economy. Governments have shifted their focus to expectation management, making policy-making more open and transparent, policy goals more consistent and unified.

As policy plays a significant role in resource distribution, governments, in turn, have greater leverage on market expectations. For that reason, under normal circumstances, macro-policy targeting developed market shall be clear and consistent. Policy-makers should be careful in speaking and action to avoid deviated understanding among the market, minimize its impact on economic activities and maintain the effective running of economy on its own. Only in emergencies causing "collective irrationality" would governments adopt market intervention and expectation guidance to fix market failure. To make it more difficult, in the Internet Age featured by fast information dissemination, wrong messages have caused harm to the society and economy before they have been corrected. So, the society has always been looking forward to accurate and clear expectations.

It is difficult to be accurate, or to be clear. Greenspan, former Fed Chairman, known for his obscurity in statements, once said: "If I seem unduly clear to you, you must have misunderstood what I said." Of course, the obscure and implicative language to avoid impacting market expectations brought about much trouble to his personal life. During his 12-year-long romance, Mr. Greenspan proposed twice but due to his typical language style he failed to deliver his message clear enough to the girl, and it was not until he used normal languages that he finally succeeded. In the Internet Age, will such language style work out?

Aside from economic volume and growth rate, market expectations equally deserve our attention for its impact on economy, especially when expectations severely deviate from economic fundamentals. In today’s world, expectations are no longer "virtual". Without proper expectations, consumers would hesitate to spend, and investors tend to be more prudent, resulting in restrained investment, one-way capital flow and extreme price volatility. Some exporters would even be reluctant to take orders. Real economy would be severely affected directly or indirectly. Capital market is the most "expectation-sensitive", as seen from the fact that China’s stock market was the “Champion Bear” for three consecutive years in the world, the record-low banking stock prices deviated grossly from China's yuan appreciation, sound economic data and corporate financial indicators. While A share index has seen a drop of 8.9% this year as of August 5, Dow Jones and Nasdaq were up by 19.14% and 22.3% respectively. Some expectations have recently driven capital outflow from emerging economies to Europe which was mostly tabbed "extremely sluggish" just a few weeks ago. Is the market really changing so quickly?

Interestingly, China lacks of expectation management instead of "prophets". Some, bold in thinking, speaking and forecasting, believe prophecies are not rumors, and wrong prophecy comes at no cost. Some repeatedly fail to tell the right but never give up. Some even betray professional ethics by manipulating economic data and talking nonsense as they wish. Those who can see the truth know well that “it is easier for Prophets than Paul the Octopus to make prophecies”. As the market moves either up, down or between, they would be finally right if only they bet on one side. In this way, some predict the upcoming winter while still in spring. Followers would put on too much clothes and go through a long, torturing summer. A good example is Nouriel Roubini who forecasted "a financial crisis in two years" as early as in 2006. He is always bearish, which he himself never denies. Even the more frequently heard are pessimistic forecasts over China. As Stephen Roach, former non-executive chairman of Morgan Stanley Asia and a renowned economist, recently pointed out, "the punditocracy has once again succumbed to the "China Crash" syndrome – a malady that seems to afflict economic and political commentators every few years. Never mind the recurring false alarms over the past couple of decades. This time is different, argues the chorus of China skeptics". When these "China Crash" claims were testified wrong, no one held accountable these so-called "prophets" who are now busy at preparing another "prophecy".

Some prophets are even profit-driven, who are either China bears or market bears to reap huge profit. Their "expectations" are aimed at profits. Irresponsible forecasts and motive-driven expectations become noises and distort market behaviors, which in turn causes the irrational "Herd Behavior" and exacerbates economic fluctuation. Such speculative “expectations” mislead the judgment on real markets. However, more often than not, the truth is invisible to us, with the disguise of distorted expectations.

Confidence is more precious than gold. To stabilize economy, we need expectations that are more objective and credible. In my understanding, expectations by entrepreneurs deserve more attention.

Given the increasing social influence, entrepreneurs should take the initiative to voice themselves and guide market expectations, rather than remain silent like the majority of the public. In the past two decades or so, reform has endowed Chinese entrepreneurs with both rare opportunities and challenges, who blazed new trails and grew to be a pillar of our national economy with increasing social impact. Still, many of them are low-profile, focused on their own business and reluctant to comment openly on economic outlook. There are also some active entrepreneurs or organizations, like the Yabult Entrepreneurs Forum, whose influence has continued to grow.

As an idiomatic Chinese poem line puts it: Ducks know first the warming up of spring waters. Compared to the above-mentioned "prophecies", expectations by entrepreneurs are more well-grounded and credible. First, they are involved into the market, facing directly their customers and suppliers. They stay nearest to the grass-roots, which helps them make accurate economic forecast and accordingly reflect the trend of real economy by their expectation. Second, their expectations will be fulfilled by their real investment, leaving no room for fake, unreliable expectations. Third, different from on-looking prophets, they are swimmers in the sea of market and are more responsive to changes in water temperature and waves. They develop high sensitiveness and sharp judgment through tough competition, thus more reliable in analyzing the macro-economic conditions.

The experience and wisdom possessed by entrepreneurs are treasures, which, if properly utilized, can serve well as an important expectation index to guide market behaviors. They are capable of and responsible for saying more, louder and clearer to guide the market to reach reasonable expectation, as a distorted market harms normal production and investment of enterprises, which is undesirable to entrepreneurs. The Yabult Entrepreneurs Forum offers us a good platform, which, I suggest, be used to publicize entrepreneurs’ expectations and confidence. For example, you can forecast macroeconomic trend from the perspective of your own industry, from which a comprehensive expectation can be drawn. We can also establish Yabult entrepreneurs’ confidence index, compile specific indicators and carry out polls on entrepreneur representatives to work out a series of confidence index.

With entrepreneurs’ expectation and confidence index, as I suppose, the market can interpret China’s economy more objectively, reaching reasonable expectations and adjusting economic behaviors accordingly. All these will contribute to a stable Chinese economy. More convincing is for sure the sustainability and balance of China’s economic development, which also relies on entrepreneurs’ concerted efforts.

Thank you！