If you were an ordinary villager in the poorest village of the poorest mountainous area in Hubei Province and you wanted to plant 10 mu of tea in the hope of earning more money for paying for your children’s education, and for buying some new clothes and new furniture for your family, but you had neither money nor a market for your tea, what would you do?

This question has recently been answered with satisfaction inTongshan County,HubeiProvince: you can apply for a bank loan. Governments and banks have initiated special loan projects to enable companies to purchase products. Financial engineering supports a group of local enterprises.

A team, led by Ye Yonggang, a Professor at the Economics and Management School, has been observing Tongshan County for 4 years and has witnessed the positive results that have arisen from effectively implementing financial engineering

Four years ago,TongshanCountyhad a pressing need to get rid of its poverty, and this need drew the attention of Ye Yonggang’s team. The head of the county and the secretary of the county party committee repeatedly visited Ye Yonggang inWuhan University. After several discussions, the Financial Engineering and Risk Management Center of Wuhan University and the Tongshan County Government signed a strategic cooperation agreement, which had been designed to promote fast and sound economic development by using financial tools while controlling for risk.

Over the last two years, Ye and his team have been developing an “innovative version” of financial engineering in the county: they designed financial engineering programs, implemented the programs in various departments, and evaluated the performance of the programs; they established a county-level risk management system to control risk and they have made county-level macro balance sheets; up to this point, 15 small-and mid-sized enterprises have been listed on capital markets and some have even started to go global.

Meanwhile, they have brought new ideas to financial institutions. As a result, “loans for guarantee-assistance funds”, “agriculture-supporting loans”, and “business-supporting loans” were initiated. Through these new forms of loans, governments and banks have granted a great number of loans to the local residents, all with risk being kept in check. Through financial engineering programs, government resources can be fully leveraged and provide priority support to listed enterprises.

In 2014, they began to develop an “updated version” of financial engineering. First they updated the financial industry by using multiple financial tools; they gave priority support to leading industries, realized the effects of convergence, and highlighted the characteristics of industries; they underlined the role of insurance in rural economic growth.

Mountainous and rural areas are short of cultural and recreational facilities, let alone modern commercial and logistics centers. In order to solve these practical problems, Ye and his team worked with the local government to establish a center for financial services. They adopted a series of measures, which includes bringing investment into the area, so that cultural and recreational facilities as well as modern commercial and logistics centers could be improved, and so that internet could cover the entire region.

In today’sTongshanCounty, the loan-to-deposit ratio has grown from being 30% three yeas ago, to 60% today, and GDP has increased by 20%, ranking in the top5 inHubeiProvince. The county has become prosperous without asking for any financial support from higher-level governments. In 2014, an on-the-spot meeting was held inTongshanCounty, and on behalf of his team Ye Yonggang shared his experience in this regard

At the same time, Ye’s team embarked on a journey of putting city-level financial engineering into practice. The first group of pilot cities includes Xianning, Huanggang, Shiyan and Enshi. Huanggang made the fastest progress, achieving initial success within only one year: its loan-to-deposit ratio has increased by three percentage points compared to 2014, reversing the downward trend it had been experiencing; more than 20 financial institutions have been introduced into the city and more than 40 enterprises have been listed on capital markets.

“Our work has moved governments, enterprises and residents, and raised awareness among people about the important role that finance has played in our society and lives”, said Song Lingfeng, a member of the team & Professor at the Economics andManagementSchool.

Ye Yonggang stated that if the planned city-level program proceeds successfully, they would introduce this practice to other parts ofChina, so as to benefit more Chinese.

Reporter’s notes:

A simple, resolute scholar fromWuhanUniversityleads a capable team and undertakes a cause with far-reaching impacts. This is the deep impression the reporter has been left with after interviewing Ye Yonggang.

Ye Yonggang came into contact withTongshanCountypurely by chance.

“Three years ago, I led students to investigate and survey a mountainous county inHubeiProvinceand we stayed there a night. In the depth of that night, when all was quiet deep at night, the moon illuminated the sky with its radiance. A brook in the woods bubbled crisp, watery songs and then I faded into reverie.” The area’s poverty and its beauty struck a chord Ye Yonggang. The financial economist made up his mind to do something.

A strong desire had blossomed deep in his heart: why not spread the benefits of modern financial engineering toChina’s remote and impoverished area? If financial engineering worked well in one county, shouldn’t it also work in all of the other counties throughout the province? Shouldn’t it work well in all rural areas inChina? Shouldn’tChinathus set a good example for all other developing countries?

This desire had been lingering on his mind, spurring him on to put it into practice, and thus he has brought tangible benefits toTongshanCounty.

Introducing financial engineering toChinaand using it to benefit the whole country has been Ye Yonggang’s dream. Several decades ago, when Ye was studying atCornellUniversity, he was deeply enthralled by the effects of human financial engineering. He studied diligently and, before leaving theUSforChina, bought almost all of the books written by the pioneers of financial engineering. He was fined at the airport as the books were overweight, so he borrowed some money from his American friends and then took the books back to Luojiashan.

He told himself that if one generation failed, future generations would continue thinking about and bringing new ideas to financial engineering and that they would eventually succeed at mastering it, so as to use it benefit our country, especially the residents in underdeveloped areas. He worked day and night, leading a group of students to delve into those English textbooks. Decades later, Ye Yonggang and his team have started to see the results. A great number of people inChinawill also benefit from his work.

A group of scholars have contributed their knowledge of finance to the great rejuvenation of the Chinese nation. They have left a glorious chapter inChina’s history.

And that is the glory of Luojia.

(Reporter: Feng Lin Editor: Fu Xiaoge)