China's economy has great flexibility and resilience, and it has strong defense and self-healing ability against the current epidemic impact, which can enable China's economy to quickly return to the track of good development on the basis of overcoming the current difficulties and risks. The epidemic will not change China's economic fundamentals and long-term trends. If it can promote a new round of reform and opening up, the best investment opportunity is in China.
Image source/Xinhua News Agency
■ Liu Yuanchun Ren Zeping Chen Yanbin and Wu Ge jointly solved the problem
Recently, China Macroeconomic Forum (CMF) of Renmin University of China actively organized internal and external experts to conduct joint research on "Economic growth and macroeconomic policies under the background of epidemic situation".
China's economy has strong resilience
Although the epidemic has had a certain short-term impact on China's economy, the basic trend of China's strong economic resilience, large room for maneuver, good stability and long-term improvement has not changed. What are the main aspects of China's economic resilience?
Liu Yuanchun (vice-president of China Renmin University and co-founder of China Macroeconomic Forum): First, the greatest resilience of China's economy comes from the leadership of China's * * * production party and the institutional advantage of socialist concentrated efforts to do great things. This advantage determines that China can make use of the national strength to quickly win this epidemic prevention and control war and quickly restore the economic and social order to normal.
Second, after more than 71 years of development, China has laid a solid material foundation and production capacity. The epidemic situation is difficult to cause substantial damage to China's fixed assets of several hundred trillion yuan, the labor force of nearly 911 million people and the largest and most complete production system in the world.
Third, China has a super-large market and huge potential for domestic demand. The impact of the epidemic can't shake the virtuous circle of China market. The upgrading of residents' consumption, the promotion of urbanization and industrialization and the rapid development of service industry will provide broad space for development.
fourth, the vigorous development of new economy and new kinetic energy will cushion the impact of epidemic situation to a great extent. In particular, the development of new formats, such as Internet economy and online office, has ensured the effective operation of China's economy and society in the epidemic and cushioned the impact of the epidemic on the traditional economy.
Fifth, the China government has strong economic regulation and control ability, sufficient policy toolbox and broad policy space, which determines that China's economy has strong self-repair ability. At present, the debt ratio of China government is less than 61%, the budget deficit ratio is less than 3%, and the average weighted interest rate of all kinds of loans is still around 5%, thus ensuring that the China government can continue to carry out the flexible "six stabilities" policy under the general tone of striving for stability.
On the whole, China's economy has great flexibility and resilience, and it has strong defense and self-healing ability against the current epidemic impact, which can enable China's economy to quickly return to the track of good development on the basis of overcoming the current difficulties and risks.
Ren Zeping (Chief Economist of Evergrande Group and President of Evergrande Research Institute): The epidemic will not change the economic fundamentals and long-term trend of China. If it can promote a new round of reform and opening up, the best investment opportunity is in China.
First, China is the second largest economy in the world, and the Chinese and American economies dominate the world. According to the IMF's estimation, the global GDP in 2119 reached 86.6 trillion US dollars, of which China and the United States accounted for 16.6% and 24.7% of the global GDP respectively.
Second, in 2119, the real GDP growth rate of China was 6.1%, which was at the leading level in the world. In contrast, the real GDP growth rate of the United States, South Korea, Britain and Japan is 2.3%, 2.1%, 1.4% and 1.7%, respectively, which are far behind China.
Third, there is still much room for growth in China's per capita GDP. In 2119, China's GDP per capita was 71,892 yuan, or US$ 11,277, which was only about 1.6 of that of the United States and 1.5 of that of the United Kingdom, and was equivalent to that of Japan in 1981 and South Korea in 1994, with great potential for future development.
Fourth, there is still room for 21% improvement in China's urbanization rate. In 2119, the urbanization rate of China was 61.6%, which was only slightly higher than the world average of 55.3% in 2118 and far lower than the average of 81% in high-income countries. At the same time, the urbanization rate of registered population in China is much lower than that of permanent population, and there are still about 231 million migrant workers and their families' children who have not become citizens.
Fifth, China has the largest market and the largest middle-income group in the world. China has a unified market with a population of 1.4 billion, where goods, people, services and capital can flow freely, and there are huge scale effects in product research and development, production, logistics and sales.
Sixth, China is rich in labor resources, and the demographic dividend has turned to the talent dividend. At the end of 2119, the working-age population in China was about 911 million, with more than 711 million employees, 711 million high-quality talents with higher education and vocational education, and about 8 million college students graduated every year. Although the total population of China has surpassed that of lewis turning point, the rising population quality has given birth to a new round and greater talent bonus in China.
Seventh, China is very active in innovation and entrepreneurship, and the number of unicorn enterprises in the new economy is second only to the United States. In 2119, the proportion of newly added unicorns in China and the United States was 12.6% and 55.9% respectively. In the future, the combination of China's information service industry with artificial intelligence, AR and VR technologies will still release huge growth potential and provide important kinetic energy for economic development.
The epidemic situation will not change the long-term positive trend in China
Will the epidemic situation affect the potential growth rate in China? Should we restore economic growth mainly from the demand side or the supply side?
Liu Yuanchun: The economic impact caused by any epidemic is exogenous, short-term and local in nature, and will not cause the economic development trend of a large economy to deviate. This is because the long-term development trend and production capacity of a country mainly depend on three factors: first, the capital stock and its growth rate. The second is the situation of labor force and its human capital accumulation. The third is technological progress and the improvement of resource allocation efficiency. These three factors will not change fundamentally because of the impact of the epidemic.
Throughout the history of nearly a hundred years, no major epidemic has caused a long-term stagnation of a large economy, and the economy generally returns to the normal development track about 1 quarters after the epidemic subsided. Therefore, the current epidemic situation will only bring about a small economic fluctuation of 1-2 quarters at most, and will not change the medium-and long-term positive trend of China, and the potential growth rate of China will not deviate systematically. Therefore, the current economic work should focus on the orderly resumption of work and production, so that the economic cycle can be normalized as soon as possible, and it is not appropriate to launch a large-scale economic expansion plan before the economic and social order is normalized. Economic policies should focus on epidemic relief and promoting the recovery of economic circulation system, and adhere to the basic principles of bottom line management.
Ren Zeping: The economic impact of this epidemic will be greater than that of SARS in 2113, but the time may be shorter, depending on the duration of the epidemic and the impact of policies. At present, we should take into account the epidemic situation and long-term reform, and make efforts on both sides of supply and demand to launch several key measures with ice-breaking effect, release major signals and boost confidence of all parties. First, reserve projects in advance, implement large-scale infrastructure after the epidemic, and fill in the pits hit by the epidemic. In particular, large-scale infrastructure construction should be carried out in urban agglomerations and regional central cities with population inflow in order to stimulate demand, stabilize employment and hedge the downward pressure on the economy. The second is to implement large-scale tax reduction and fee reduction and optimize the way, from reducing value-added tax to reducing corporate income tax and social security contribution rate, and improve the sense of enterprise acquisition. On the one hand, we will continue to reduce the social security contribution rate by 3 percentage points, of which the pension and medical insurance contribution rates will be reduced by 1 percentage points and 2 percentage points respectively. On the other hand, the corporate income tax rate is lowered to 21%, which is equivalent to the US federal corporate income tax rate.
watch out for six risk points in an epidemic situation
what are the key risk points to watch out for in an epidemic situation?
Liu Yuanchun: First, under the downward trend of economic growth, the employment risk is the biggest grey rhinoceros. In February, the index of manufacturing employees was only 37.9%, which was 1.5.7 percentage points lower than that of the same period in 2119, indicating that the job market contracted. Although it will not cause large-scale unemployment, the employment situation is obviously tight.
second, the current structural upward trend of prices will be further manifested, so we should guard against the risk of stagflation. It can be predicted that the price will be released quickly after the epidemic control is relaxed. At the same time, the inconsistent process of returning to work and production in different industries and regions will also lead to bottlenecks in the supply chain and the rapid rise of some raw material prices.
Third, we should be alert to the risk of rapid global economic decline and large fluctuations in financial markets caused by the spread of the epidemic around the world. At present, the spread of the epidemic around the world has obviously intensified. Therefore, China will face great uncertainties in the global economy and international financial markets in the coming period, and corresponding plans should be made to prevent the potential impact of external shocks on China's economy.
fourth, we should attach great importance to the uncertainty of the real estate market to prevent the rapid decline of house prices. After the epidemic, the situation that real estate enterprises quickly withdraw funds by drastically reducing prices will increase. Once the price reduction expectation is formed, it will easily form an unfavorable cycle of "decreased willingness to buy houses-decreased demand leads to lower house prices-increased price reduction expectation", which will have a great impact on the stability of the real estate market.
Fifth, we should be highly alert to the risk of asset bubble caused by loosening monetary policy. At present, the economic cycle has not basically recovered, the liquidity released by monetary policy is difficult to flow into the real economy, and the large-scale entry of funds into the financial market will bring the risk of asset bubble. The asset bubble will trigger a sharp correction in the financial market and hinder the economic recovery of China after the epidemic.
Sixth, we should be highly alert to the risk of government debt aggravation caused by excessively proactive fiscal policy. Different from the international financial crisis in 2118, the impact of the epidemic is short-lived, and the economic operation will return to normal after the epidemic, so the reason for adopting a large-scale stimulus policy similar to that in 2119 is not sufficient. Moreover, excessively active fiscal policy will lead to a sharp increase in government debt and macro leverage, which will become the core source of financial risks and hinder the improvement of social productivity.
Ren Zeping: At present, it is necessary to give consideration to epidemic prevention and control and resume production, and be alert to the phenomenon of "one size fits all, one layer at a time" in epidemic prevention and control in various places. Some cities with mild epidemics blindly copy the measures in areas with serious epidemics and adopt various over-restrictive measures. They can't seek truth from facts and adapt to local conditions. Without a bottom-up plan and enterprises paying the bill, the epidemic prevention and control measures are infinitely expanded, and economic development is basically stagnant. In essence, it is a manifestation of laziness and irresponsibility.
The "one-size-fits-all, layer-by-layer overweight" prevention and control has disrupted the economic operation order and brought severe pressure to enterprises, industries, industrial chains and social stability. Therefore, we should adhere to the "two-handed grasp" of epidemic prevention and control and enterprises' resumption of work, take measures of prevention and control by districts and levels, put an end to the practice of being lazy in politics in the name of epidemic prevention and control, and restrict enterprises' resumption of work in a simple and rude way.
how much impact will the epidemic have on the global supply chain? What measures should China take to consolidate and improve our position in the global supply chain so as to enhance its international competitiveness?
Ren Zeping: The epidemic has impacted the global supply chain, and China must steadily grow through reform. First, liberalize market access in basic fields such as automobiles, finance, energy, telecommunications, electric power and service industries such as medical education, and foster new economic growth points. Deepen the reform of state-owned enterprises, implement competition neutrality and ownership neutrality, eliminate ownership discrimination, and improve market competition and resource allocation efficiency. The second is to improve the multi-level capital market supporting system with the reform of the registration system as the starting point. The third is to promote the reform of the housing system with "linking people with land and financial stability" as the core, strengthen the residential and real economic attributes, and weaken the financial attributes. On the one hand, the reform of "linking people with land" is centered on the increase of permanent residents. On the other hand, maintain the stability of real estate financial policies, return to marketization, support the demand for just-needed and improved home purchases, and support inter-industry mergers and acquisitions. The fourth is to mobilize the enthusiasm of local governments and entrepreneurs, give local officials a new incentive mechanism, and reassure private entrepreneurs.
Monetary policy should focus on directional control and precise control
At present, the CPI is at a high level in recent years, which makes the efforts of monetary policy constrained. However, the epidemic situation has obvious impact on catering, tourism and other industries, among which small and micro enterprises need to increase counter-cyclical adjustment. Under the dilemma, how should monetary policy be positioned?
Chen Yanbin (Executive Director, Key Research Base of National Economics Textbook Construction, Ministry of Education, China Renmin University, Professor of School of Economics, and main member of China Macroeconomic Forum): In October 2121, the year-on-year increase of CPI rose to 5.4%, reaching the highest level since 2112. The core CPI excluding food and energy prices rose by only 1.5%, which was at a low level below 2% for six consecutive months. The trend differentiation between the overall CPI and the core CPI has caused some troubles to the formulation of monetary policy.
theoretically, monetary policy should focus on the core CPI rather than the overall CPI. This is mainly because the CPI including food and energy prices is prone to unexpected large fluctuations, which will disturb public expectations and restrict the monetary policy space. This round of CPI increase is mainly affected by the epidemic situation of pork price increase, which has no great correlation with economic fundamentals. Therefore, a prudent monetary policy should not be constrained by the rise of the overall CPI, but should adhere to the goal of stabilizing the economy and increase counter-cyclical adjustment.
Of course, the increase of CPI caused by the increase of pork price can not be ignored. Effectively solving the structural problem of rising pork prices requires other targeted economic policies, such as financial subsidies, to stimulate production and achieve price stability, and cannot rely on monetary policy based on total adjustment.
Wu Ge (chief economist and assistant to the president of changjiang securities): First, in order to cope with the severe impact of the epidemic, monetary policy should adhere to a prudent and slightly loose orientation. In the first quarter, when various industries were generally hit hard, loose monetary policy was needed to "escort" steady growth and stable employment. Second, it is necessary to grasp the intensity and rhythm of monetary policy easing, adhere to moderate easing but avoid "flooding". At present, the increase of CPI is at a high level, and the extent of monetary easing needs to consider the impact on prices. At the same time, excessive monetary easing will easily lead to a sharp rise in house prices. In the future, we still need to adhere to the positioning of "housing and not speculating" to prevent excessive liquidity from pushing up housing prices. Third, monetary policy should adhere to directional control, precise control and rational use of policy tools. This epidemic has a great impact on the secondary and tertiary industries and small and medium-sized enterprises. Therefore, monetary policy operation should focus on directional regulation and precise regulation, and rationally use structured monetary policy tools to achieve precise assistance.
how can monetary policy improve the regulation efficiency and strengthen the support for the real economy more effectively under the epidemic situation?
Chen Yanbin: In the face of this epidemic, the monetary policy has taken various measures in time to release abundant liquidity, and actively guided the downward trend of market interest rates through policy interest rates. However, it should also be noted that the current effect of monetary policy is more reflected in the rapid rise of the stock market, and the problem of funds "deviating from reality to emptiness" has appeared. Therefore, improving the efficiency of monetary policy regulation and making monetary policy support the real economy more effectively is a key issue to be solved urgently.
In fact, the problem of poor transmission of monetary policy in China has always existed, and its root lies in the distortion of economic and financial systems and mechanisms. On the one hand, there are some departments with soft budget constraints in the real economy, and there is a large demand for credit funds, which squeezes the credit resources of other departments. On the other hand, under the background that interest rates are still regulated, commercial banks can obtain a stable net interest margin, so they are unwilling to take too many risks and are more willing to put credit resources into budget soft contracts.