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The past 2023 is the first year of economic recovery after the adjustment of China's epidemic prevention and control policies. Looking back at the beginning of the pandemic in 2020, it is hard to imagine that four years later, economic globalization, the geopolitical landscape, and the economic problems facing China have all undergone such dramatic changes. This article is based on Dean Guan Qingyou's internal speech in July 2020.
* |Progressive investment in research.
Economic globalization is not as good as before, and we must be prepared
At present, the trend of economic globalization is indeed very worrying. The ideal blueprint is one thing, the harsh reality is another. I agree with Ray Dalio's deduction that the world may form a so-called parallel world in the future, with further degradation of economic globalization and further degradation of international cooperation, and many international public goods cannot be provided.
At the same time, we see that economic globalization is due to the prevalence of protectionism, coupled with the impact of the epidemic, the disruption of shipping routes, large-scale reduction, and the connection between the world's first and foremost has begun to weaken and degenerate, and the original global prosperity scene no longer exists, and even many institutions believe that in the next three to five years, it will decline by 30-40%. For the global layout of the original industrial chain, it is actually catastrophic news, which will continue to affect the original industrial layout, manufacturing, asset allocation, capital markets of various countries, exchange rates, people's lives, etc. Of course, we hope that this situation will not happen, but if it happens or has a relatively high probability of happening, it is indeed necessary to be prepared, which is what we have been emphasizing, to give full play to the importance of the domestic cycle and the international cycle, and to be prepared.
Judging from the recent direct investment data and foreign trade data, under the impact of various economies around the world, the industrial chain that we were worried about was moved out of China and China was marginalized, but this situation did not really happen. Why? The whole world has been impacted, but China's industrial chain is the most complete, and China's ecology is the best, so many first-class partners have given cooperation opportunities to Chinese enterprises under the impact of the epidemic, which is also the news that we see that under the epidemic, it may be gratifying news for Chinese enterprises and Chinese investors. Of course, even so, we must admit that the recent situation of the global economy and economic globalization is much worse than before, and we need to be prepared.
The road is tortuous, and the future is not necessarily bright. If we compare it with the heyday of the world, the global outlook is not bright. This is what Ray Dalio emphasized, the global outlook is not good, and humanity may face a worse world pattern and environment than it was during World War II.
The current policy should be moderately relaxed to leave room for the future
I have previously used the story of "the dragon king rains" to explain the important logic of the global economy and financial operation since 2001. We know that since the 911 incident in 2001, the United States has started a precedent of large-scale economic stimulus, and Greenspan pressed this button. After 2001, the world entered a new round of growth, the so-called boom period of high growth and low inflation, and then the subprime mortgage crisis broke out in the United States, which further triggered the global financial crisis and affected all countries in the world. But at that time, China and the United States joined forces to deal with the global crisis in 2008, which enabled the two major powers to quickly emerge from the quagmire of crisis. This shows the importance of Sino-US cooperation.
Since 2008, various countries have taken different paths, but there is one thing in common: Europe, the United States, Japan, and including China have all moved towards a relatively loose monetary policy. Europe and the United States call quantitative easing, because there is no more room for reform, and the economic growth potential is not as large as China's, so the intensity, scale and duration of quantitative easing are relatively long. In the decade from 2008 to 2018, China experienced three major easing, in 2009 in response to the global financial crisis, and in 2012 to prevent the economy from falling below 75. In 2014, the consideration of preventing the economy from falling below 7 made sense. However, we have seen that even with such a large easing policy, it has not curbed the momentum of economic continuity, and there are both long-term structural factors and short-term cyclical factors.
These three major easing have indeed solved some of the problems, but they have also caused relatively large sequelae. For example, housing prices** that have lasted for nearly 20 years, and round after round of asset bubbles. After easing in 2014, there was a huge bubble, the stock market crash broke out in June 2015, as well as the debt disaster, the easing policy coupled with regulatory loopholes, resulting in continuous bubbles in assets, and then the bubble burst, and huge financial risks, which is one of the important reasons why the regulators decided to rectify the financial market and financial system after 2017. It can be said that 2017 is the inflection point of the entire financial cycle from the upward to the downward, and in terms of data indicators, the added value of China's financial industry accounted for 8% of GDP in 201535%, this figure has set a historical peak, and this peak is higher than the proportion of Japan and the United States during their financial bubble in the 80s and 2008 respectively. In other words, our financial prosperity is even more prosperous than when the United States and Japan were at their most prosperous, which is what many financial scholars call excessive prosperity, or it can be that the real economy has not kept up with the pace of finance. The objective result is that we have seen the accumulation of financial risks, the accumulation of debt risks, and the difficulties of structural adjustment. Therefore, the dragon king rain actually explains the process.
When it rains in the dragon king, the rain comes down from the sky, and in some places the terrain is high, and in some places the terrain is low, and the places that are closer to the dragon king can get the rain first, and they pour the rain as soon as possible to the place far away from the dragon king, which is the phenomenon of financial idling. Of course, the academic community is also debating whether this question is unsolvable based on traditional economic thinking.
For example, Modern Monetary Theory, which is more popular abroad, has also been reflected by many scholars in China - is there a problem with 4 trillion? If so, is it a problem per se, or is it a problem caused by the premature withdrawal of 4 trillion? There are still many scholars who reflect on the fact that some people do not advocate the so-called monetization of the fiscal deficit, or the form of flood irrigation, but can we consider this form, we can consider copying Europe's homework, and so on. The world is reflecting on the fact that at least at the executive level, domestic macro policies are still relatively restrained.
Personally, I support the current policy choice. On the one hand, it is moderately easing, and the demand is achieved through new infrastructure, moderate relaxation of fiscal policy and monetary policy, raising fiscal deficit, and issuing special treasury bonds. On the other hand, if the epidemic continues to recur, or if we want to coexist with the epidemic on a regular basis, more tools will be needed to hedge the impact of the epidemic in the future. Countries like the United States, Japan, and Europe have few policy tools but to continue to inject liquidity into the financial system, the so-called big release.
The problem is that if the problem had been solved by printing money, there would have been no economic problems in the world for a long time. Moreover, the financial structure of Europe and the United States is different from that of China, and we cannot simply copy the work of Europe and the United States in terms of easing the macro economy. Now in the year of the catastrophe and the pandemic, the ancestral religion has given us some wisdom, in such a situation, we must learn to recuperate, rest with the people, stay in the green mountains, and not be afraid of running out of firewood.
The main body of new infrastructure investment should be enterprises, which play a leading role
Judging from the response to several financial crises and economic crises in history, China has always relied on infrastructure support. This time, new infrastructure is also emphasized, but this time the new infrastructure power will obviously not be as big as the previous 4 trillion plan in 2008.
Specifically, it is divided into two levels: on the one hand, as a short-term response to the crisis, through infrastructure construction, whether it is traditional infrastructure construction, iron foundation, road construction, bridge building, house building, or now new infrastructure, 5G, industrial Internet, etc., these are actually to solve the shortage of effective demand by stimulating demand. Indeed, since the Great Depression, the traditional way to deal with the coming crisis has been to use the Keynesian model to stimulate aggregate demand through expansionary fiscal policy and monetary policy, and drag the economy out of the trough of the crisis. In the '98 and '08 years, China did the same. But this round we also have to solve the problem of "where will the money for new infrastructure investment come from".
The essence of the question is "who will invest". In response to the 2008 financial crisis, 4 trillion measures were taken, leading and enterprises participatingMany places have set up platform companies, and through the financing and investment of platform companies, they have driven the investment of social enterprises and private enterprises to form a chain. This chain effectively solved the problem of economic downturn and a large number of unemployment at that time, but it also caused very large sequelae, such as the problem of excessive debt and financial risks that are still being digested.
If the current debt risk and financial risk are exacerbated, especially in places at different levels, it will worsen the current debt risk and financial risk. The main body of new infrastructure should be returned to the enterprise, so that the enterprise can invest in the construction of new infrastructure according to the first initiative or guidelinesThis includes some state-owned enterprises and ** enterprises, but more social enterprises and private enterprises. Of course, for new infrastructure investment, many companies are more entangled and cautious, because financing is difficult and the investment cycle is relatively long. Therefore, in terms of investment and financing, we do need to further reform, including financing costs, financial system concessions to enterprises, etc., all of which need to be promoted simultaneously.
Macro management should look for new impetus
It is necessary to strengthen the market, deregulate and improve supply
Now we need to work on both the supply and demand sides at the same time, but more importantly, on the supply side. Now that the pandemic has impacted the operations of businesses and people's income levels, it is imperative to consider addressing the supply side in the short and long term.
In the short term, it is people's livelihood relief and enterprise bailout, and real money needs to be smashed on enterprises and people's livelihood, which is what the prime minister said at the two sessions. This time, the special treasury bonds should go directly to enterprises and people's livelihood. However, it should also be clear that the impact of the epidemic is not a simple policy that can be immediately effective, and the impact on many enterprises and industries is permanent and devastating, such as the catering industry, cultural tourism industry, and offline education industry, which has a very large impact. At the level of national macro management, we must find new impetus, which requires long-term supply-side reform, which is nothing more than the previously mentioned thinkingStrengthen markets, deregulate and improve supply.
Strengthening the market means letting the forces of the market work to the fullest. "Let the market play a decisive role in the allocation of resources" needs to sort out the unnecessary areas where the market plays a role, in fact, we can sort out a lot. It is necessary to guard against departmentalism and bureaucracy that shackle the development of the market. The so-called deregulation, in some areas, some control measures are actually unnecessary, unreasonable, or even excessive, if these control measures can be relaxed or even canceled, market forces will also be fully developed, such as the first industry, the entertainment industry. In many areas, we can increase regulatory tolerance, and we can fully allow existing market players, existing tracks, and industries to play a full role, so as to improve supply as a whole. In the medium and long term, it is necessary to unleash the vitality of production factors, including land, labor, capital, technology, and big data. I believe that this round of market-oriented reform of factors of production, if effectively implemented and truly implemented, will greatly boost China's medium- and long-term economic growth potential, and China will be the first among the world's major economies to come out of recession and offset the impact of the epidemic.
In the future, we should attach importance to the reform of state-owned capital and land reform, and feed back to the peasants
China's financial structure, urban-rural disparities, regional disparities, and income disparities show that it is difficult for us to use the stimulus policies of Europe and the United States. If such policies continue in Europe and the United States, a very likely result is that assets soar again and trees grow to the sky, but the problem is that they cannot grow to the sky, which will lead to the wealth gap, the gap between the rich and the poor will continue to widen, and social contradictions will continue to accumulate. Therefore, from the perspective of macroeconomic policy, we must recognize this point. Although our total GDP is already the second in the world, and our per capita GDP has just exceeded 10,000, the level is still relatively low. We still have many shortcomings, such as regional disparities, urban-rural disparities, and income disparities, in fact, these disparities are also the driving force that we can release through reform in the next step. There are many articles that can be done about supply-side structural reform.
First of all, the reform of state-owned capital revolves around the management of people, affairs, and assets, and capital. There are a lot of articles that can be done about the reform of the real management of capital, and I think that the gap between the current reform and the ideal plan is relatively large.
Secondly, land reform, how to reform land, an important factor of production? In order to form a large unified market in urban and rural areas, I would like to say one more thing in this regard: In the course of land reform, many of our localities only use land to achieve intensive utilization, which is wrong. The reform of agrarianization should be carried out in terms of basic ideology, law, and practice.
In the past 70 years, there has been a group in China that has been making contributions, the peasant group, and in the 30 years after the founding of the People's Republic of China, the peasant group has supported the whole country and contributed to the whole country through the contribution of agricultural industry. In the 40 years of reform and opening up, peasant groups have actually supported the city through the difference between urban and rural land scissors and continued to contribute to the whole city. It has been 41 years since the reform and opening up, and 71 years since the founding of the People's Republic of China, when promoting land reform, we must make it clear that we must feed back to the peasants, let the peasants become propertied people, return the land to the peasants, and realize the unified urban and rural markets. However, this issue is bound by existing laws and traditional concepts, and it is now difficult to move forward. In many places, there are some scenes that we do not want to see, and under the banner of intensive land use, the peasants are being deprived of their land in disguise, which is completely wrong. Therefore, in terms of land reform, there is a lot that can be done, and we must review the people-oriented concept of governing and practice the party's mass line.