**: 21st Century Business Herald, Pinglan Guantao.
Guan Tao is the global chief economist of Bank of China
In the past three years, the positioning of RMB internationalization has been updated three times, and the latest statement of 'prudent and solid' reflects that the senior management has paid more attention to the risks and challenges associated with the process of financial opening-up. From the perspective of international experience, with the continuous expansion of financial opening-up, the degree of convertibility of the capital account has gradually improved, the difficulty of financial regulation and supervision has increased, and the potential risks faced have also increased. Guan Tao, global chief economist of Bank of China, said.
How to understand the "expansion of high-level financial opening-up" and "steady and prudent promotion of RMB internationalization" proposed by the ** Financial Work Conference?Recently, the 21st Century Business Herald reporter contacted Guan Tao for an in-depth interpretation of the above issues. Guan Tao has worked in the State Administration of Foreign Exchange for 23 years and served as the director of the Balance of Payments Department of the State Administration of Foreign Exchange for 6 years.
The following is the main text:
The first financial work conference held from October 30 to October 31 proposed to strengthen high-quality financial services, expand high-level financial opening-up, serve the construction of "going out" and "The Belt and Road", and steadily and solidly promote the internationalization of RMB.
Guan Tao pointed out that at the end of 2020, the Fifth Plenary Session of the 19th Central Committee proposed to "steadily and prudently promote the internationalization of the RMB";At the end of 2022, the report of the 20th National Congress of the Communist Party of China proposed to "promote the internationalization of the RMB in an orderly manner", and "orderly" is relatively aggressive compared to "prudent";At the end of October this year, the ** Financial Work Conference proposed to "steadily and prudently promote the internationalization of the RMB", and the wording was more cautious than "orderly".
"21st Century":As the highest-level meeting in China's financial field, what are the proposals of this ** financial work conference that are worth paying attention to?
Guan Tao:**The Financial Work Conference proposed for the first time to accelerate the construction of a financial power, and required to do four tasks, one is to comprehensively strengthen financial supervision, the second is to improve the financial system, the third is to optimize financial services, and the fourth is to prevent and resolve risks. Compared with the three tasks of "serving the real economy, preventing and controlling financial risks, and deepening financial reform" put forward by the National Financial Work Conference in 2017, this ** financial work conference specifically emphasized "comprehensively strengthening financial supervision", providing guidance for the key direction of financial work in the next stage.
The meeting also put forward the guidelines for the construction of a financial power, which can be summarized by "five to", that is, "to accelerate the construction of a financial power as the goal, to promote the high-quality development of the financial industry as the theme, to deepen the financial supply-side structural reform as the main line, to the purity, professionalism and combat effectiveness of the financial team as an important support, to comprehensively strengthen supervision, prevention and resolution of risks as the focus", which provides a guiding ideology for the current and future period of financial work.
In addition, on how to provide high-quality services for economic and social development, the meeting put forward "three focuses": first, we should focus on creating a good monetary and financial environment, and effectively strengthen high-quality financial services for major strategies, key areas and weak links;Second, we should focus on building modern financial institutions and market systems to dredge the channels for funds to enter the real economyThird, efforts should be made to promote high-level financial opening-up and ensure the country's financial and economic security.
As far as my own academic experience is concerned, I have a deep understanding of the third point, that is, the relationship between high-level financial openness and national financial and economic security. At the same time, high-level financial opening-up is also an objective need to promote economic and social development, which is conducive to better safeguarding the country's financial and economic security.
* The Financial Work Conference clearly proposed to promote high-level financial opening-up, adhere to the equal emphasis on "bringing in" and "going out", steadily expand the institutional opening of the financial sector, and improve the facilitation of cross-border investment and financing, which is not only a powerful response to the trend of anti-globalization, but also a useful supplement to the new system of a higher-level open economy.
"21st Century":How to understand the relationship between "high-level financial opening-up" and "national financial and economic security"?
Guan Tao:As I mentioned earlier, high-level financial opening-up is the only way to build a financial power, and at the same time, high-level financial opening-up is also an objective need to promote economic and social development, which will help better safeguard the country's financial and economic security. In fact, these three complement each other and promote each other.
On the one hand, an open financial market and an internationally competitive financial system are important components of building a financial power. The rise of great powers is inseparable from the strong support of finance, and financial powers are usually global. The great powers that have played a leading role on the stage of world history, such as the Netherlands, the United Kingdom and the United States, are all financial powers. One of the weaknesses of the Japanese yen and the euro that they are unable to challenge the hegemony of the dollar is that there is a clear gap between the financial markets and financial systems of Japan and Europe and those of the United States.
On the other hand, two-way opening-up, institutional-based opening-up, and facilitation are important characteristics of high-level financial opening-up. This will help support the global business layout of domestic enterprises and enhance the ability to utilize two resources in both domestic and international marketsIt will help accelerate the creation of a first-class business environment that is market-oriented, law-based and internationalized, and more effectively attract and utilize foreign investmentIt will help uphold multilateralism, participate in global financial cooperation and governance as a builder and contributor, and build an open world economic system.
In addition, a high level of financial opening-up will help better safeguard the country's financial security. The report of the 20th National Congress of the Communist Party of China clearly stated that social stability is the foundation of national rejuvenation, and social stability is the prerequisite for a strong country. We must unswervingly implement the overall outlook and ensure social stability throughout the entire process of maintaining the work of the party and the state in all aspects.
Economic security is the foundation of the country, and financial security is an important part of economic security. It should be emphasized that to maintain financial security, it is necessary to promote security through opening-up, not to ensure safety by "closing the door". The reason why Western countries have been able to brazenly launch joint sanctions against certain countries is largely due to the fact that the countries concerned have few economic, trade and financial ties with the outside world. Expanding financial opening-up will help strengthen foreign financial ties and form an intertwined relationship of interests and interests, so that the outside world will inevitably have scruples when imposing measures that harm each other such as the Cold War, decoupling, and financial sanctions, thereby providing a guarantee for China's economic and financial security.
"21st Century":What do you think of the change in the wording of "prudently and solidly promoting the internationalization of RMB" in the ** Financial Work Conference?
Guan Tao:At the end of 2020, the Fifth Plenary Session of the 19th Central Committee of the Communist Party of China proposed to "steadily and prudently promote the internationalization of the RMB".At the end of 2022, the report of the 20th National Congress of the Communist Party of China proposed to "promote the internationalization of the RMB in an orderly manner", and "orderly" is relatively aggressive compared to "prudent";At the end of October this year, the ** Financial Work Conference proposed to "steadily and prudently promote the internationalization of the RMB", which is more cautious than "orderly".
In the past three years, the positioning of RMB internationalization has been updated three times, and the latest statement of 'prudent and solid' reflects that the senior management has paid more attention to the risks and challenges associated with the process of financial opening-up. From the perspective of international experience, with the continuous expansion of financial opening-up, the degree of convertibility of the capital account has gradually improved, the difficulty of financial regulation and supervision has increased, and the potential risks faced have also increased.
First, cross-border capital flows and RMB exchange rate fluctuations. With the gradual opening of the financial sector from long-term capital to short-term capital (such as investment in ** and bonds), and from one-way opening to the "deep water area" of two-way opening, the degree of marketization of the RMB exchange rate has been deepening, and the market exchange rate overshoot that deviates from the fundamentals often occurs. In general, exchange rate depreciation will promote capital inflows, curb capital outflows, and thus smooth cross-border capital flows. However, when unilateral expectations and herd effects occur, exchange rate depreciation can lead to larger capital outflows. Since the outbreak of the new crown epidemic, China's cross-border capital inflow and exchange rate appreciation and depreciation cycles have switched rapidly. Since 2019, the RMB exchange rate has fallen below seven four times, including the third time in mid-September 2022, the seventh again in early December of the same year, and the fourth time in mid-May 2023. If effective measures are not taken, the pro-cyclical herd effect will exacerbate the fluctuations in the RMB exchange rate and the large inflow and outflow of cross-border capital, affecting domestic financial stability.
Second, the risk of overseas speculation of domestic financial assets. With the increasing opening up of domestic, bond, foreign exchange, currency and commodity markets, foreign capital is gradually becoming an important force affecting China's cross-border capital flows and RMB exchange rate trends. However, the expansion of financial opening-up means that the linkage effect between domestic and foreign capital markets and assets has been enhanced, and the probability of internal contagion of overseas financial risks has increased significantly. At the same time, some overseas funds, by virtue of their advantages in the market, resources, information, technology, etc., may build some complex trading strategies, speculate or even manipulate domestic financial assets, and launch financial attacks on the mainland.
Third, the ability of domestic investors to participate in the allocation of global resources is being tested. Compared with mature financial markets in the West, China's financial market is deficient in terms of scale, depth, breadth, internationalization and financial infrastructure. At the same time, domestic entities do not have a good understanding of the regulatory regulations and cultural differences in overseas financial markets, and lack investment and financing experience. When the investment and financing environment at home and abroad deteriorates, it is difficult for domestic entities to hedge risks through effective asset allocationWhen disputes arise in investment and financing behaviors and lead to litigation, they may also face issues such as legal conflicts and legal enforcement.
"21st Century":In your opinion, how should we promote high-level financial opening?And how should we "steadily and steadily promote the internationalization of the RMB"?
Guan Tao:As far as promoting high-level financial opening-up is concerned, first, it is necessary to firmly grasp the initiative in opening up the financial sector to the outside world, adhere to the general tone of the work of seeking progress while maintaining stability, and coordinate financial opening and security. To this end, on the one hand, it is necessary to grasp the rhythm and intensity of promoting high-level financial opening-up, and on the other hand, it is necessary to study and deploy at the same time to expand opening-up and prevent risks. For example, the mention of the internationalization of the RMB in this ** financial work conference has become "prudent and solid", which is actually an important embodiment of the requirement to grasp the rhythm and intensity of financial opening, after all, with the increasing international status of the RMB, the difficulty of cross-border capital flow management and financial regulation is also increasing.
Second, it is necessary to adhere to the two-wheel drive of reform and opening up, and when reform in any field is too fast or too slow compared with opening up, it is necessary to adjust it in a timely manner to ensure that the pace of the two is roughly the same. International experience shows that immature financial openness often ends in crisis. Needless to say, the Asian financial crisis triggered by the loss of the baht at the end of the 20th century, in the 80s of the 20th century, Japan hastily promoted the internationalization of the yen in the face of insufficient financial opening theory and policy preparation, which led to economic stagnation and financial defeat. To deal with the risks facing financial opening-up, it is not only necessary to carry out adequate and effective risk prevention, but also to properly handle the relationship between reform and opening up. For example, the convertibility of the renminbi under the capital account should not be rushed or missed.
Third, it is necessary to steadily expand the two-way opening up of the financial sector, the opening up of the system and the opening up of the service real economy. In terms of two-way financial opening-up, the catfish effect of "bringing in" has prompted domestic financial institutions to participate in international competition, forcing them to accelerate the pace of reformAt the same time, it is encouraged to give full play to its comparative advantages and participate in overseas layout through "going out" to drive domestic and international dual circulation. In terms of the opening up of the financial system, it is necessary to promote the comprehensive institutional opening of the financial market in a steady and orderly manner, promote the steady expansion of the scale of institutional opening up of the domestic financial market in terms of rules, regulations, management and standards, and continuously improve the degree of integration with international standards. In terms of opening up financial services to the real economy, it is necessary to continuously improve the facilitation of cross-border investment and financing.
As for the internationalization of the RMB, it is necessary to steadily and steadily promote the internationalization of the RMB in accordance with the objective needs of economic development and reform and opening up, emphasize the internationalization of serving the real economy, and enter a new stage of quality improvement from scale expansion. It is necessary to start from the domestic economic development, strengthen the foundation, consolidate the fundamental foundation of China's economy, and strive to improve its own macroeconomic control and monetary management capabilities, so as to enhance the support of domestic economic development for the internationalization of the RMB, and in turn support the development of the real economy. At the same time, in the process of promoting the internationalization of the RMB, we will continue to deepen the market-oriented reform of the exchange rate, increase the flexibility of the RMB exchange rate, and promote the balance of payments and macroeconomic stability. In addition, it is necessary to further improve the financial infrastructure and institutional arrangements for the internationalization of the renminbi to provide basic guarantees for the cross-border use of the renminbi, and steadily innovate financial products and services to enhance the international attractiveness of the renminbi.