In October 2026, Lijian SUN, Director of the Financial Research Center of the Fudan Development Institute and Professor and Doctoral Supervisor at the School of Economics, Fudan University, delivered a keynote speech at the China Finance Forum of Zhejiang University based on his monograph How Does Finance Create Value: Functional Principles and Chinese Practice. Facing the current dilemma that the financial sector keeps expanding yet is misaligned with the real economy’s lived experience and may even destroy social value, he constructed a testable theoretical framework of financial value creation. SUN pointed out that the classic Fisher separation theorem has three theoretical limitations—exogenous value creation, transparency of financial intermediation and presupposed trust conditions—and cannot explain real-world problems such as credit misallocation. He proposed a value-function theory that endogenizes value creation and ranks it first among six core financial functions, arguing that finance’s core value lies not only in allocating resources along a given production frontier, but in pushing the service recipients’ production frontier outward through four carriers—cohesion, focus, innovation and leadership—with social net value as the ultimate criterion. Introducing the three-party participation constraint and the logic of value-chain finance, he noted that financial institutions are third-party actors with their own interests, and sustainable financial innovation should generate profits by creating cooperative surpluses through value-chain synergy rather than appropriating others’ value. Regarding Chinese practice, SUN said that China’s financial development has followed a “quantity first, quality later” path and is now being forced to shift from scale expansion to quality and efficiency; the five major finance directions, such as technology finance and green finance, are core scenarios for testing value-chain synergy. On opening up, the focus should be on creating global cooperative surpluses, and institutional reform requires proper sequencing. He concluded that the essence of financial value creation is organizing cooperation under trust and incentive-compatible conditions, pushing the production frontier outward and sharing surpluses fairly; the core yardstick for judging financial business and institutions is whether they push the production frontier forward or merely transfer wealth, and whether they empower those they serve or merely reinforce their own dominant position.

Translated by FDDI

Full text in Chinese available at:

https://fddi.fudan.edu.cn/20/d7/c18965a794839/page.htm