Lee Chan-jin, governor of the Financial Supervisory Service (FSS), said at the 30th Seoul Economic Daily Financial Strategy Forum on Wednesday that "the KOSPI rally is merely a priming pump," adding that "the next step of building a robust mechanism through which money can naturally flow is more important." His remarks indicate that the Lee Jae-myung administration's goal is not simply to boost stock prices but to redirect market liquidity from real estate to productive sectors by nurturing the capital market.
"Productive finance" that grows the capital market is essential for overcoming low economic growth. Developing advanced industries such as artificial intelligence (AI) requires astronomical funding. Differences in investment scale translate directly into technology gaps. This is why, in an era of global technology competition, redirecting funds concentrated in real estate toward advanced and innovative industries is urgent.
Nevertheless, the corporate share of financial-sector lending has plunged from more than 90 percent in the 1980s to the 50-percent range today. In contrast, real estate-related loans account for 43.4 percent of private-sector credit, far higher than in advanced economies. As market funds flow into unproductive sectors, the real economy is burdened by weakened consumption and investment, as well as the risk of distressed real estate projects. The financial sector's contribution to investment in strategic industries such as AI and semiconductors has also fallen short of expectations. The excessive concentration of finance in real estate is even causing broader social problems, including widening asset inequality and low birthrates linked to housing shortages. While the banking sector, which has focused on easy interest-margin business, bears much of the blame, the harms of "government-controlled finance" cannot be overlooked either.
The government and the financial sector must unite behind a major shift toward "productive finance" for sustainable growth. In particular, the government must swiftly dismantle outdated regulations, such as the separation of banking and commerce, so that financial institutions can invest in large-scale advanced industries. Giving preferential treatment to corporate loans in financial soundness assessments and expanding tax benefits for venture and other risk capital are also needed. Above all, identifying new growth engines through structural reform and deregulation is the top priority. The concentration of market funds in real estate is evidence that no other promising investment destinations are visible. If Korea improves its economic fundamentals and builds an ecosystem for advanced and innovative industries, productive finance will naturally follow.
