Article/Ren Zeping, columnist of Sina Financial Opinion Leader Column (WeChat official account kopleader)
Long term reform also requires a stable macro environment.
I would like to introduce two perspectives: the situation and suggestions.
Our link is very good and very relevant to the current theme. Today's guests also have some differences. For example, President Gao does not suggest raising the deficit rate, and Yu Dong suggests breaking the 3% dogma.
What should we think about the future situation and policies? In 2010, I participated in the research on "speed shift". In 2014, we proposed that "the new 5% is better than the old 8%". In 2015, we made a very important judgment that China's economy may have been quite close to the bottom, and the future economy will be L-shaped. In 2017, we proposed a new cycle, and this year, we proposed a recession of the financial cycle.
As you know, I am firmly optimistic about the long-term prospects of China's economy. But for the short-term economic situation, We should have a full estimate. Because from the perspective of methodology, only when the severity has been fully estimated can we have sufficient preparation and calmly deal with it.
To judge the future economic situation, frankly, This time, the L-shaped economy will have two bottoms. The first bottom is from the second half of 2015 to the first half of 2016, and then it will fall back from the second half of 2017. It will probably hit the bottom twice in the first half of 2019, and may hit the bottom in the middle of 2019.
The analysis of China's macroeconomic situation is not complicated at all, that is, three carriages and two engines. Among the troika, consumption, investment and export slowed down. Among the two engines, local governments and private enterprises were constrained by fiscal consolidation and financial deleveraging respectively. The big background is the speed change, the superposition of structural and cyclical factors.
Let's look at some data to feel the current economic situation. In terms of GDP growth, the GDP growth rate in the third quarter was 6.5%, which was the lowest since the first quarter of 2009. In the past ten years, only two quarters of our GDP growth rate was lower than 6.5%, the fourth quarter of 2008 and the first quarter of 2009, respectively, because of the impact of the international financial crisis. Since then, we have never been lower than 6.5%, which is the first time.
External environment. Some scholars used a very sophisticated model to measure our current exports some time ago, saying that Sino US trade frictions have little impact on us. In fact, in October, our PMI manufacturing new export order index was 46.8%, which was the lowest in 33 months. In addition, some time ago, we rushed to export and overdraw the demand. As Kissinger said during his visit to China, we may need to redefine China US relations. This year, we made some misjudgments on many situations, including the Sino US trade friction. Some people at the beginning thought that the Sino US relationship was neither good nor bad. In fact, the trade friction was escalating. At the beginning of the trade war, we proposed "long-term and increasingly severe", "this is containment under the banner of trade protectionism" and "our best response is reform and opening up". On January 1 next year, the 10% tariff on goods of 200 billion US dollars will be raised to 25%, if the two sides cannot reach consensus before that. Of course, the door of bilateral economic and trade negotiations has not been closed. On the one hand, it depends on China's reform and opening up process, and on the other hand, it depends on the impact of trade frictions on the United States beginning to appear. The recent slowdown of the United States economy and the sharp decline of the stock market may make the Trump government begin to calm down and return to the negotiating table.
In terms of finance, the supply of M2 fell to 8.3% in September. What concept? 8.3% is the new low in the past 20 years. The total amount of social financing and financing provided by financial institutions to the real economy from January to September this year was 15.4 trillion yuan, a net decrease of 2.3 trillion yuan over last year, which used to grow every year. Just now, Mr. Bai Chongen said that the investment dropped to 5.4%. In fact, through historical comparison, the growth rate of fixed asset investment dropped to 5.4% from January to September, which is a new low since the Asian financial crisis in 1998.
What caused the current situation? The primary reason is that some situations have overlapped. Macroeconomic people know that they are not afraid of anything. They are most afraid that things will come together. There are external trade frictions, and internal structural transformation, fiscal consolidation, financial deleveraging, environmental protection, and capacity reduction. In addition, some policies in recent years fluctuate too much, a little too tight when they are tight, and too loose when they are loose. Good macro-control must be a gentle breeze and gentle rain.
So this is the situation, Put forward some constructive suggestions.
The most important thing is to increase reform and opening up.
This year is the 40th anniversary of the reform and opening up, and we have made remarkable achievements and miracles. However, since joining the WTO in 2001, we should objectively admit that we are a bit old school in the process of opening up. In the 1980s, we set up pilot coastal open cities, and joined the WTO in 2001. We are all opening up with great strength and scale.
In fact, we still have many areas to open up Never think that China's opening up has been successful. For example, the proportion of state-owned enterprises in the manufacturing sector is only 10%, while foreign capital and private enterprises account for 80% and 90%. Therefore, China's manufacturing industry is very competitive in the world. Why? Openness brings. however Our service industry, including the financial industry, is not open enough. Why is the cost of basic factors too high in China? It is related to insufficient competition. The reason for insufficient competition is the lack of openness.
We should be open and confident. We must pay attention to that manufacturing countries such as China, Germany and Japan, including South Korea, naturally benefit from globalization, market integration and trade globalization.
Second, our macro-control should not swing too far. In fact, the logic is not complicated. Because there is a time lag between policy formulation, transmission and effectiveness. If you want the policy to take effect immediately, it must be too strong. It took a long time for the Federal Reserve to raise interest rates from creating expectations to raising interest rates finally. So, Our macro-control policies should have a period of interaction and adaptation with enterprises.
Third, it is suggested that the fiscal policy should make positive contributions. Now we have several misunderstandings about fiscal policy:
one The macro regulation and supply side reform are artificially opposed. Reform is about managing long-term economic growth, while macro-control is about managing short-term economic fluctuations. Why oppose it? Everyone takes care of different things. Long term reform also requires a stable macro environment.
two Increase the deficit rate for next year and cut taxes on a large scale. Do not be restricted by 3%. Our current financial professionals should clarify one question: do you want to balance finance or functional finance? How can the government maintain its own financial balance when the economy is bad? How can enterprises live? Should we wait until the economy is good to cut taxes? It is no longer necessary. Instead, we should expand the deficit and expand tax cuts when the economy is bad, which is the functional finance to smooth the fluctuations of the economic cycle.
three Some people say that there are no investment opportunities now, many of them are surplus. China's per capita GDP is less than 1/6 of that of the United States. Why do we have no investment potential? We not only have large-scale investment potential in infrastructure, but also need tens of billions of large-scale investment in high-tech fields, such as integrated circuits, semiconductors, engines, artificial intelligence, etc. We can invest on our own, or we can reduce taxes for enterprises to invest. Enterprises have great investment potential. Not that we have no investment potential, but that we need new ideas. Opening up will also bring investment potential, tax reduction will also bring investment potential, and encouraging entrepreneurs' confidence will also bring long-term investment potential.
Fourthly, as for monetary and financial policies, objectively speaking, we have achieved some results in the past in financial deleveraging, and we should turn to stabilizing leverage in the future. What is more important? We should distinguish between good leverage and bad leverage. The off balance sheet and shadow banking business of our bank has largely met the financing needs of SMEs and private enterprises. If SMEs and private enterprises can get loans from the bank's on balance sheet, why should they go off balance sheet? Why go around? Because it's not available. We can't cut across the board. Off balance sheet banking, our channels including shadow banking do have money speculation and regulatory arbitrage. We should resolutely crack down. however Some of them meet the financing needs of small and medium-sized enterprises. We should distinguish them from each other. We should not apply a one size fits all approach. I think the current policy has begun to be adjusted and improved in this direction.
Finally, we emphasized the top-level design in the past, and the top-level design is right, because we have carried out 40 years of reform and opening up, and our strategic direction has been very clear. However, we have carried out reform and opening up in the past 40 years. In terms of reform methodology, we should remember that there are still many traditional wisdom that cannot be lost. The key is six words: gradual, incremental, and pilot. Because it is in line with human epistemology, we need to find the correct solution in the process of exploration. Therefore, the methodology of future reform can consider the top-level design plus incremental, progressive and pilot.
To conclude, ladies and gentlemen, With an open mind, everything can be accomplished; with complacency, ten things and nine empty things can be achieved. China still has a huge gap in reform and opening up, economic development and social development. A huge gap means huge potential and opportunities. We are convinced that China's economic prospects will be brighter after the reform and transformation!
The content is derived from Dr. Ren Zeping's speech at the 2019 Annual Conference of Finance and Economics
(The author of this article introduces: Chief Economist of Evergrande Group, President of Evergrande Economic Research Institute. He once served as Deputy Director of the Research Office of the Macro Department of the Development Research Center of the State Council, Director General Manager and Chief Macro Analyst of Guotai Jun'an Securities Research Institute.)
