Chapter 7 Chapter 6 Currency and Finance: Let the RMB Serve the People

Can the risk be shielded if the renminbi is closed?In order to avoid an economic downturn, the authorities may hope to adjust the exchange rate policy to play a more positive role and slow down the pace of appreciation.Now there has been a trend from appreciation to depreciation of the renminbi.So, how should China fundamentally adjust its exchange rate policy? Liu Wei: This is the problem of the exchange rate mechanism.There has always been a view in China that China avoided the positive impact of the financial crisis this time, including surviving the Asian financial crisis in the late 1990s. The important point is that China's currency is not a free currency. China's financial system It is not open enough, it is basically closed, so the risks are shielded.Why wasn't it hit positively?Because you are behind.Let’s use an analogy: B sees A accidentally choking on water while swimming, and he is secretly happy that he can’t swim.You can't summarize your own shortcomings and shortcomings as advantages.Well, after this financial crisis, with the adjustment of the world economic center of gravity, everyone should see that China's direction is internationalization and marketization, and the RMB must also be internationalized.

Moreover, along with the improvement of national power, the liberalization and internationalization of RMB is definitely a progressive and civilized direction.This crisis tells us that the speed of RMB liberalization and internationalization should be in line with national strength, and currency liberalization should not be carried out blindly, but it should not oppose or hinder the direction of RMB liberalization and internationalization.Wouldn't it be better to be more closed?China's monetary policy is like a heart that needs blood, but the blood vessels are blocked here.Having passed the test of such a severe economic crisis, what are the shortcomings of China's economic policies, especially monetary policies?When the crisis came, what problems occurred when we used financial tools?How to improve?Liu Wei: This is a big question.Because there must be problems with China's monetary policy, the currency problems of various countries are undergoing self-examination through this crisis.Some people think that monetary policy is useless at all, and even think that the crisis is caused by monetary policy, and then let fiscal policy pay for it.But in China, to be honest, it is not that the monetary policy is not loose enough, but that there is a problem with the transmission mechanism of the monetary policy.The entire social system prevents the expansion of the entire currency from being passed on and cannot be realized. This is a very important issue.

For example, the heart needs blood supply, but the blood vessel is blocked here.This is probably a big problem that needs to be solved in the future.This crisis has verified China's excessive dependence on external demand, but I do not quite agree with this judgment.What is excessive?Do you have an accurate degree?If China really enters into the integration of the West, it may suffer a greater disaster and pay a greater price.What we want to oppose is integration. As a developing country, how can China integrate with developed countries?We have our own independent national culture and ideology, how can we integrate with Western Christian civilization?We are an economic, social, legal, and administrative system with our own special social system. How do you integrate with Western systems?Therefore, generally we should not put aside national conditions and international realities, and simply talk about integration blindly. The integration practices of Eastern Europe in history have all proved to be failures.But you must know that this cannot be used to oppose globalization.Globalization must be a trend, an irresistible historical trend.China's future economic development must be part of the world, and China's use of foreign resources and markets must be part of globalization.The above-mentioned issues are all very critical issues that have an impact on China's system.

Tax cuts are more meaningful and efficient than spending increases.Under the current economic situation, enterprises, especially small and medium-sized enterprises, are calling for tax cuts.In this regard, do you think there are any better reform measures to relieve the current predicament of enterprises as the cells of the market economy, and even the entire social group? Wei Jianing: This issue is actually fiscal and tax reform, that is, the transformation of value-added tax.On the one hand, it can play a role in reducing taxes, and on the other hand, it can encourage enterprises to update their equipment.Now the central government is doing it, and it is estimated to cut taxes by 120 billion yuan, which should be given a positive evaluation.In the current economic environment, tax cuts are a preferred policy, which is more meaningful and efficient than spending increases.This is the consensus of scholars.In addition, whether personal income tax can appear on a family basis.In fact, this is the same policy in foreign countries, which has two advantages: first, it can reduce taxes and reduce family burdens if there are dependents; second, it can reduce employment pressure. It is not necessary for husband and wife to both work, and the wife can take care of the family at home. .Because the part of raising the population was removed during the tax cut, and the pressure on families to pay taxes was greatly reduced.In addition, resource prices need to be straightened out, including the collection of fuel taxes.For example, the issue of fuel tax has been debated for 14 years, but it has not been introduced for so many years because the price of oil is constantly rising, and consumers are worried that consumers will not be able to afford it; now that the price of oil has dropped, it is the right time to introduce it.

The fuel tax can also be said to be a tax-to-fee reform. Road maintenance fees and bridge tolls may be included in it. The advantage of this is that it encourages the purchase of cars, but discourages the use of cars.In the past, as long as you bought the car, you had to pay the fee whether you drove it or not, but now you don’t have to pay the fee if you don’t drive it, which tends to be more reasonable.Local governments should be allowed to issue bonds to promote the reform of the local fiscal system.I have four reasons in favor of local bond issuance.The first reason is that local governments generally implement infrastructure construction, and the funds used for construction often come from the previous generation or generations. The cycle of infrastructure projects is relatively long. After several years of completion, it is often the next generation or even the next generation. Several generations enjoy it, so there is an intergenerational injustice.Therefore, allowing local governments to issue bonds can solve the problem of intergenerational inequity, and future generations should repay the debts for future generations to enjoy.The second reason is that even if the central government does not allow local governments to issue bonds, in fact many local governments still have various forms of hidden debts.This invisible debt cannot be seen, touched, calculated, and the risks cannot be controlled or managed.It is the same as underground finance, so I advocate "covering the truth"... The third reason is that it has many advantages over bank loans.Now infrastructure projects rely on bank loans. For the recently implemented "4 trillion" investment, local governments will definitely seek out banks. The reason is that banks must lend to support local construction.The central government has the spirit to point out that it is to stimulate domestic demand, while banks can only lend, without a shield.

Therefore, the local government does not have to worry about the benefits of using money, but the risk of the bank is increased.If bonds are issued, there can be four constraints: first, local people’s congresses must be approved to issue bonds, which is the case in all countries.Secondly, the central government checks and blocks projects that do not meet the requirements.The third is the role of credit rating agencies.Fourth, the restraint mechanism is that investors, including commercial banks, can make independent decisions, buy if they are profitable, and not buy if they think the risk is too high.This constraint is market-oriented, and investors have complete initiative.This bond is nationally interoperable with no restrictions.But generally the local people know the local conditions better.For example, when the subway is built in Beijing, the people in Beijing can easily know the benefits, and the local media is more aware of the project.If it becomes a project like image project, the local people will definitely not pay the bill.Therefore, local bond issuance has stronger constraints on projects and is less risky than bank loans.The fourth reason is that local government bonds pay more attention to efficiency than national debt projects.National debt projects are all approved by the National Development and Reform Commission. When the local government reports the projects, the projects that have no benefits must also be listed. After all, they can boost the GDP at that time.Generally, the money is obtained first, and the actual benefits after the project is completed, the local government does not care, and the central department does not care.We found this kind of problem during our local research. After the national debt project was built, it was abandoned.Therefore, the national debt projects since 1998 are worth investigating.

I think there is also a problem with investing all the time now.What do you think of the central government's proposal to implement a proactive fiscal policy and a moderately loose monetary policy this time?Why take maintaining growth as the primary task of macro-control? Zhang Zhuoyuan: Under the severe economic cold wave, the government adjusted macroeconomic policies in a timely manner, and made maintaining stable and rapid economic development the top priority of economic work in 2009, including implementing a proactive fiscal policy and a moderately loose monetary policy.Looking at it now, it is very timely and absolutely necessary to adjust macroeconomic policies, especially to implement a proactive expansionary fiscal policy, in order to maintain an economic growth rate of around 8%.The reason why the implementation of proactive fiscal policy is necessary is mainly that the economic downturn in recent months has been too severe, far exceeding people's expectations.A large number of factories closed or stopped production, and the number of unemployed people increased a lot.For example, it is reported that about 20 million migrant workers in China have lost their jobs due to the economic downturn, or have not found a job and returned to their hometowns, accounting for 15.3% of the total number of migrant workers who went out for employment.This is not only a huge economic problem, but also a huge social problem.Therefore, an expansionary fiscal policy is required.The core of the government's efforts to promote economic growth is to promote employment.This is a common practice in market economy countries, and practice has proved to be effective.Expanding domestic demand is an inevitable choice. In recent years, China's domestic and foreign demand has been seriously unbalanced, and economic growth is overly dependent on external demand.

During the Asian financial crisis in 1998, my country's dependence on foreign exports (that is, the proportion of exports to GDP) was 18%, but it rose to 38% in 2007; domestic demand was insufficient, especially consumption demand was seriously insufficient, and the final consumption rate dropped to 50%. %, of which the proportion of household consumption has dropped to below 40%.After the outbreak of the international financial crisis, developed countries fell into economic recession one after another, and the demand for imports dropped sharply, which led to a large number of export enterprises in our country to reduce orders, shrink exports, and even stop production.Therefore, in order to curb the severe economic downturn, we must expand domestic demand and change the situation where economic growth is overly dependent on exports.In fact, at the end of 2008, the central government has urgently launched a policy of expanding domestic demand. In November 2008, the State Council proposed a "4 trillion" investment stimulus plan, and various provinces and cities proposed investment stimulus plans for their own regions, adding up to a total of 23.5 trillion yuan.At the same time, as the planned issuance of long-term construction treasury bonds increases, the amount issued in 2009 will be far greater than the 360 ​​billion yuan in 1998-2000 when the proactive fiscal policy was implemented.The above-mentioned investment plan will be gradually implemented to promote economic growth.As long as the international financial crisis does not worsen unexpectedly, and both the central and local governments are mobilized, maintaining growth will not be a big problem.It is estimated that in the second half of 2009, the economy is likely to turn warmer driven by intensive investment.

I think there are problems with continuous investment now, especially when we go to the local area, projects that were rejected in the past are re-launched, affecting the ecological environment, which is tantamount to solving temporary problems with new overcapacity.This is definitely not possible.In the context of the deepening of the international financial crisis, is it possible to "guarantee 8%" (that is, an 8% increase in GDP) this time?Personally, I don't think it is too difficult to "guarantee 8". What is difficult is the following supporting facilities, such as changing the mode of economic growth, adjusting the structure, saving energy and reducing emissions, and improving people's livelihood.Good and fast is a problem worth studying in expanding consumer demand.Efforts should be made to increase the income and consumption levels of low-income groups, rather than giving top priority to improving the income levels of middle-class people.This is also good for improving the structure of investment and consumption.Therefore, in terms of how to expand consumption, it is necessary to find ways to expand demand, and to be more specific.Expanding domestic demand includes expanding investment demand and expanding consumption demand.Our country's long-term investment growth rate is too fast, and the expansion of domestic demand should focus on expanding consumer demand.

The report of the 17th National Congress of the Communist Party of China stated: "Adhere to the principle of expanding domestic demand, especially consumer demand, and promote the transformation of economic growth from mainly relying on investment and export to relying on the coordination of consumption, investment and export." But it is difficult to do it in practice.This is mainly because the short-term effect of expanding domestic demand and promoting growth depends on expanding investment demand, while expanding consumer demand is conducive to structural adjustment and long-term sustainable growth, but it is not easy to achieve short-term results.At present, the main tendency of government departments is to focus on expanding investment demand and invest in industrial projects with long industrial chains.Only some economists think that should mainly expand consumer demand.Some people say that China's consumption growth has not slowed down in the past few years, and it is difficult to make great strides to accelerate it.Indeed, it is difficult to substantially increase consumption growth and residents' income levels by conventional means.Therefore, if we want to significantly increase consumption, especially the proportion of residents' consumption, we need to take another big step, relying on fiscal resources, and this will affect investment.To maintain growth, expand domestic demand, and adjust structure, the most difficult thing is to adjust structure.Structural adjustment is to change the mode of economic growth or development.

This is a very arduous task, and it needs to be done slowly, and it may not even be obvious during the term of the current government.Therefore, it is difficult for some government departments to choose it as the focus of their work.Their priority is to ensure that the economic growth rate does not fall below 8% in the past two years, even if some "two high and one capital" projects are required, they will not hesitate to postpone the conflict as much as possible.To adjust the structure and transform the mode of economic development, on the one hand, we must focus on improving the ability of independent innovation, saving energy, reducing consumption and reducing emissions.On the other hand, reforms must be deepened so that the economy and society can be put on the track of scientific development.This includes no longer using GDP growth rate as the main criterion for assessing the performance of government officials, rationalizing the prices of factors and resources, increasing market openness, introducing environmental protection taxes, and accelerating the transition to public finance, etc. Some of these are similar to short-term growth. There will be certain contradictions, so it is not easy to introduce.The introduction of the fuel tax also shows the difficulty of reform.If oil prices in the international market had not fallen by more than 2/3, the fuel tax that has been shouted for many years would not have been introduced.The fuel tax burden introduced now seems to be too low, and the effect on energy saving is not large enough.