The three-day "New Development Pattern and 14th Five-Year Trend - 2021 Xinjing Think Tank Spring Summit" has entered its final day. On April 17, at the theme forum of "Domestic Large Cycle and Economic Recovery Dividend", Zhang Bin, deputy director of the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, said that he was more inclined to use monetary policy to support demand growth and reduce the debt costs of enterprises and residents by reducing interest rates.
When it comes to interest rate cuts, many people worry about house prices. Zhang Bin said that monetary policy has a short-term effect on curbing house prices, but the real contradiction in house prices is on the supply side, and there is still room for housing prices in metropolitan areas to decline.
Talking about the impact of the external environment on China's economy, Zhang Bin said that China's supply capacity is strong, and he is not particularly worried about external shocks. He also mentioned that China's economic data has shortcomings, which reflects that many public services and public management are not yet in place, and the government should put the provision and improvement of services in a more important position.
More inclined to use monetary policy to support demand growth
Under the new development pattern of "double circulation", how to expand domestic demand is the key, and what kind of monetary policy is needed for domestic circulation and expansion of domestic demand?
Zhang Bin said that when we talk about expanding domestic demand, there are actually two types, one is based on the long-term, the other is based on the present, and the total demand should be maintained at a reasonable level. One of the most important considerations for the emphasis on aggregate demand is the low-income group. In a downturn, the middle-income and the rich can survive, but the poor will be very hurt and they will be the first to lose their jobs. From this point of view, it is very important to maintain the stability of aggregate demand.
He further said that although the first quarter GDP data released a few days ago is eye-catching (up 18.3% year-on-year), the growth rate is not so high. From the perspective of policy adjustment direction, China's fiscal expenditure has shrunk greatly, the generalized fiscal is tightening, and the governance of local platforms is also in a critical period. "The policies are all closing, but now the economic growth momentum is not strong, in the structural sense we have not yet returned to normal state, and our fiscal situation and financial market subtraction has done a lot, which requires monetary policy to maintain sufficient flexibility to give the economy more support." Zhang Bin said.
What is flexible monetary policy? Zhang Bin said that the main thing is interest rates, monetary policy to play a role, through the reduction of interest rates to reduce the cost of debt of enterprises, residents, while the valuation of holding assets increased, so that residents' balance sheet is stronger.
Compared with fiscal policy, Zhang Bin is more inclined to use more active monetary policy and interest rate policy adjustment to support demand growth. He explained that fiscal policy is the government borrowing money, the government spending money, the better place for monetary policy is to rely more on private forces, with the help of the market itself to expand demand.
Monetary policy has a short-term effect on curbing house prices, but the real contradiction in house prices is on the supply side
When it comes to interest rate cuts, on the one hand, people will be linked to inflation. Simply put, "money is not worth it" is inflation.
International commodity prices have risen significantly this year, and market inflation expectations have continued to rise. However, Zhang Bin said that the price of individual commodities has risen, but the overall inflation is not too high. From a global perspective, there is some inflation in some countries, but for some industrialized countries with strong supply capacity, inflation is not a big problem, but it is based on some short-term factors to rush upwards.
When it comes to interest rate cuts, many people will worry that after the cost of use is reduced, funds will flow to the property market, which will push up house prices. Zhang Bin analyzed that there are two considerations for the housing price problem that needs everyone's attention, one is whether to sacrifice economic prosperity in order to control housing prices, sacrifice most people's wallets, sacrifice many people's employment opportunities, and maintain housing prices in individual cities.
Second, whether monetary policy can effectively curb housing prices. "In the short term, you can, everyone has no money, and surely the house price will not rise." But we also know that the real contradiction in housing prices is on the supply side, in the supply of land, housing public services. He said.
Zhang Bin also said that it should be clarified that the housing prices in China's big cities are very high, but it is not equal to the housing price bubble, and the high housing prices are not high in the central urban area, but the housing prices in the metropolitan area (suburbs) are all high as a whole, which is unacceptable to the vast majority of the middle class, which means that a large number of people have lost the opportunity to enter the big cities to change their destiny.
"What most people are concerned about is that housing prices in the metropolitan area will come down, there is room, we have land, we can do a little better infrastructure, and these are not solved [through] monetary policy." Zhang Bin said.
China has a strong supply capacity and is not particularly worried about external shocks
Talking about the impact of the external environment on China's economy, Zhang Bin said that the epidemic situation in some developed countries has been controlled to a certain extent, which has a certain positive effect on China's export and manufacturing industries.
"Many people still have a lot of concerns about the international market, and if there are some adjustments, it may affect us." But I'm personally not too worried about this, and we now have mechanisms designed to cope with shocks. Zhang Bin further said that China's economic fundamentals are much better than other countries, and the industrialization capacity and supply elasticity are relatively good. In the face of the same shock, many developing countries will have severe inflation, because the demand will rise slightly, the supply will not be, the price will rise, but the supply elasticity of the industrialized countries is enough.
He stressed that at present, China's supply capacity, especially in the manufacturing industry, is very strong and flexible. So our ability to cope with shocks is good, not particularly worried.
Governments should give greater priority to the provision and improvement of services
In the context of expanding domestic demand, how to adjust and cooperate with the industrial structure? Zhang Bin believes that from a medium- and long-term perspective and from an overall perspective, we must have a better supply system to expand domestic demand.
"At this stage, the biggest shortcoming in China's economy is not manufacturing, nor is it a well-competitive industry such as tourism, but a service industry that is still facing a high degree of control and a low degree of marketization, including government public services." Zhang Bin pointed out.
According to his observation, the shortcomings of China's economic data are that, first, there are still nearly 300 million migrant workers in China who cannot really enter urban life; second, we talk about new urban diseases (expensive housing, expensive medical treatment), which is also a common pain point in our lives. And what is reflected behind these phenomena is that many public services, public management are not in place, medical care, education, financial services, etc. many have not kept up, not because these industries do not work hard, but because many of our current regulatory policies are not in place, either too much management, or it is not managed.
Zhang Bin suggested that the transformation of the government is not necessarily in the whole country, but some governments should change from a development-oriented government to a service-oriented government, and put the provision of services and the improvement of services in a more important position. At the same time, there is a very important point, that is, the accountability mechanism, which is equivalent to the value assessment of the market. "On the one hand, tell us what the government needs to do, and on the other hand, tell the government that if it doesn't do well, it will be held accountable." Top-down accountability mechanisms also need to be established. ”
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