Guan Tao: The truth about China's cross-border capital flows

Guan Tao is the Global Chief Economist of BOC Securities and a director of the China Chief Economist Forum

From the balance of economic downturn and strict epidemic prevention policies, exchange rate flexibility and flexibility, to the risks and countermeasures of China's cross-border capital flows, Guan Tao answered them one by one, trying to find the key to decoding the dilemma of China's capital flows in an extraordinary period.

Ouyang Xiaohong, chief reporter of the Economic Observer

It seems that the historical course that has been rewritten by war and epidemic is still unclear. At this point, what is the truth about cross-border capital flows?

At a time when the situation in Russia and Ukraine is deteriorating, global inflation is high, the Federal Reserve is accelerating its tightening policies, the world economy is being disturbed, and the scale of global wealth management is shrinking, in the face of unexpected factors at home and abroad that exceed expectations, how can we build a financial safety net to prevent the risk of cross-border capital flows?

"The degree of private currency mismatch is greatly improved compared with the '8 ·11' exchange rate reform, and the ability to resist risks is very strong" "The market has adapted to the rise and fall of the exchange rate, but experts have not adapted" "The secondary 'foreign exchange reserves', which are quite a reservoir, can play a role in regulating supply and demand"...

In the special period, Guan Tao, global chief economist of BOC Securities, who spoke with the Economic Observer, was confident in China's financial stability from a foreign exchange perspective. However, he frankly said that "although the land stock connect has a daily quota, if it is concentrated, the scale of one month is not small, and it is necessary to make a response plan under different circumstances."

On April 7, Li Keqiang, member of the Standing Committee of the Political Bureau of the CPC Central Committee and premier of the State Council, presided over a symposium of experts and entrepreneurs, and one of the key expressions of the meeting was to expand high-level opening up, do a good job in stabilizing foreign trade and foreign investment, maintain the basic stability of the RMB exchange rate at a reasonable and balanced level, and effectively cope with the uncertainty of the external environment.

Guan Tao participated in the speech as an expert. He once wrote that in order to prevent and resolve the risk of foreign debt, at the government and market levels, it is necessary to strengthen the judgment of marginal changes in the domestic and foreign situations, improve the monitoring of cross-border capital flows, and formulate a plan to deal with the reversal of capital flows.

From the balance of economic downturn and strict epidemic prevention policies, exchange rate flexibility and flexibility, to the risks and countermeasures of China's cross-border capital flows, Guan Tao answered them one by one, trying to find the key to decoding China's capital flow dilemma in an extraordinary period.

One

Economic Observer: At present, the situation at home and abroad is complex and changeable, and many unexpected factors have exceeded expectations; what uncertainties and challenges have they brought to the stable operation of the current economy? It seems that we are faced with a dilemma of balancing the economic downturn and strict anti-epidemic policies...

Guan Tao: Just as the symposium made its judgment on the current economic situation, economic operation is facing greater uncertainty and challenges.

Externally, the intensification of geopolitical conflicts and the erosion of momentum in the global economic recovery could accelerate the narrowing of the mainland's trade surplus. For example, according to the average global crude oil price of $103 / barrel in the first quarter of this year, if the amount of crude oil imports is the same as the same period last year, it will need to pay an additional $130 billion compared with last year.

At the same time, although China's economy took the lead in resuming work and production, our export pricing power is limited; for example, some foreign trade orders, foreign investors are worried that logistics are not guaranteed, may place a lot of orders at the same time, who ships first and delivers into storage, will pay the balance to whom, he will lose the most deposit. But this will cause competition between domestic exporters, and no one will dare to increase the price.

From the perspective of the domestic epidemic situation, China's prevention and control policies in the first two years - from vaccination and epidemic prevention and control to the strategy of dynamic zeroing after the fact - are undoubtedly the most economical and effective prevention and control measures. But the challenges this year are great: the virus is becoming more and more contagious, the infection rate is high, but the severe illness and mortality rate are low, and our biggest problem is that many elderly people are not vaccinated. Many elderly people over the age of 65 have underlying diseases, dare not and cannot be vaccinated, so their infection may be severely fatal. In addition, our medical resources are unevenly distributed, and once a large area is infected, it may also cause a run on medical resources. Therefore, it is not a question of "lying flat" or not.

Then, the next thing to consider is how to prevent and control more accurately and scientifically and reduce the cost of epidemic prevention. But there are always more ways than difficulties. I am not an expert in this area, but I believe that experts can find a compromise plan to keep pace with the times (such as the effective epidemic prevention policies and methods in the past, etc. are adjusted according to the development and change of the situation).

In fact, the "exceeding expectations" mentioned at the recent National Standing Committee and the April 7 symposium mainly refers to the repeated over-expectations of geopolitical conflicts and epidemics, which have also brought real-time impacts on china's economy, including psychological negative impacts.

Of course, this is not only a challenge for China, but also a global challenge.

Economic Observer: Based on these unexpected factors that exceed expectations and are uncontrollable, what measures do you think can be taken to stabilize growth and employment, including price stability? Are we pessimistic or optimistic overall?

Guan Tao: I can talk about my feelings about participating in the premier's symposium this time: at the macro and micro levels, including hot issues of market concern, the premier and relevant departments have a lot of information from different channels; and the relevant departments are already formulating countermeasures. For example, as mentioned in the press release after the symposium, "to ensure the orderly operation of backbone networks such as transportation trunk lines and ports", "do a good job in spring ploughing production without missing the agricultural time, and do a good job in ensuring the supply and stable price of agricultural materials" and so on. Entering the second quarter, macro policies should take the initiative, cope with difficulties, rely on the front, and strengthen forces at the right time.

The press release of the symposium made it very clear that there are two important aspects of stabilizing growth and maintaining economic operation within a reasonable range: stabilizing employment and stabilizing prices. In this regard, measures are being taken to strengthen training for reemployment and to expand the scope of unemployment coverage. The employment data for February was grim. Employment is the biggest livelihood, and relevant departments are constantly studying and taking measures in response to new situations. The second is consumption, such as proposing to expand effective investment and consumption through financial innovation.

From the current troika point of view, investment or focus. In the first quarter, local government special bonds issued more than 1 trillion yuan, accounting for about 36% of the annual quota, which can be described as the fastest quarter of the same period of the past few years, and related projects may also be launched in the later stage, including infrastructure investment. Investment is an important starting point, and decision-makers have confidence in it. At present, the tasks set by the Central Economic Work Conference and the Government Work Report are also to rush forward as much as possible.

Optimistic or pessimistic? I believe that the government is well aware that the economy is facing great uncertainties and great challenges, but it can only face the difficulties. At the same time, there is a plan for new situations and a plan for worse situations.

Two

The Economic Observer: You proposed that in view of the fact that the focus of US monetary policy is "anti-inflation", China's monetary policy is focusing on "stable growth", and the interest rate differential between China and the United States treasury bond yields will be further narrowed or even inverted in the future. However, the narrowing of the Interest Rate Differential between China and the United States is not a constraint on monetary policy; in this regard, does the mainland monetary policy have enough space and how to cash in on the "main me"?

Guan Tao: First of all, I think that there is still some room for China's fiscal policy and monetary policy, especially monetary policy, and the recent narrowing of the Interest Rate Differential between China and the United States has narrowed relatively fast (on April 11, the yield of the 10-year Treasury bond between China and the United States was inverted, the first time since 2010), but the trend of the renminbi is still relatively stable.

Because, from the perspective of the foreign exchange market, it is now completely different from the time of the "8.11" exchange rate reform in 2015, and the current exchange rate is more flexible. I used to joke that now the market has adapted to the rise and fall of exchange rates, but the experts have not adapted – some people often equate appreciation with appreciation pressure and appreciation expectations.

In fact, the biggest advantage of the floating exchange rate is to release the pressure in time to avoid the accumulation of expectations; it is precisely the exchange rate that is rigid, and it is easy to accumulate pressure and form unilateral expectations if it does not rise or fall. Therefore, if the exchange rate fluctuations are regarded as pressure or expectations, it is not accurate and is a matter of course.

Another difference is that when the "8.11" exchange rate reform, the private sector had a large number of external net debt (more than 2 trillion US dollars), but now (as of the end of last year) only 1.44 trillion US dollars of external net debt, so the current currency mismatch pressure is lighter, the fluctuation of the RMB will not cause market panic, which has experienced the market stress test of the RMB breaking 7 in August 2019 and the RMB falling to around 7.2 in May 2020. The flexibility and flexibility of the exchange rate, just like the macroeconomic "stabilizer" or "shock absorber", will help to release space for macro policies and other policies and fulfill the monetary policy principle of "me as the mainstay".

The Economic Observer: The expectation of a rate cut in March is disappointed, and the downward pressure on the economy is increasing, and now the market is generally expected to cut interest rates in April and cut the RRR, what do you think about this?

Guan Tao: Not only did China not see clearly the impact of the Russian-Ukrainian conflict in March, but the United States still did not see clearly, and it is clear that if there is no Russian-Ukrainian conflict, the Fed will raise interest rates in March, and the probability will be 50 basis points.

In the global inflation environment, we also need to "cherish" the current policy space. If the "bullet" is finished at once, the problem is not solved, including epidemic prevention and control, geopolitics, etc., may not be controlled. If an unexpected situation occurs, and the policy has no room, it will fall into passivity and will greatly dampen market confidence. Therefore, monetary policy should be "good steel used on the blade".

Since the outbreak of the new crown pneumonia epidemic, China's epidemic prevention and control has been basically effective, the economy has taken the lead in resuming work and production, and the fiscal and monetary policies have maintained restraint. China has become one of the few major economies with normal monetary policy, while maintaining basic stability in domestic prices. By the end of March this year, while continuing to use various structural monetary policy tools, the People's Bank of China had already cut the RRR twice and the interest rate cut once.

This year's government work report emphasizes that macro policies should meet the needs of cross-cyclical adjustment, and while maintaining the necessary support for economic recovery, it is necessary to reserve policy space for coping with difficult challenges this year.

The Economic Observer: As you understand it, will there be a rate cut in April? In particular, the domestic epidemic has re-fermented, and Shanghai is a very important node in the global supply chain, with the world's largest container throughput.

Guan Tao: Although the monetary policy framework is transparent, it is difficult to speculate on the rules on which the RRR cut is based. Personally, I think it would be appropriate to cut interest rates in April, or to sacrifice one of the tools. After all, the impact of the epidemic is very large, and it will gradually appear. In other words, the economy has indeed encountered more difficulties than expected. In this case, the RRR cut may not have an immediate effect, but its signaling effect helps to boost everyone's confidence, in this sense, I think it can be operated.

The Economic Observer: According to your understanding, combined with the changes in the balance of payments situation, what level of fluctuations will the RMB exchange rate be at?

Guan Tao: First of all, I never guess the exchange rate level, because there is no meaning, and two-way fluctuations will be the norm. And, I think, both the government and the market are now more tolerant of exchange rate fluctuations.

The central bank has always said that the exchange rate policy is neutral, I think, that is, non-intervention is the principle, intervention is the exception. Of course, because a managed floating exchange rate system will certainly still "intervene"; That is, when the market is excessive or abnormally volatile, the central bank will only intervene, which needs to be noted. The so-called excessive volatility is that there is a large unilateral foreign exchange supply and demand gap or a strong unilateral rise and depreciation expectation in the process of the rise and depreciation of the RMB exchange rate. The so-called abnormal fluctuations are that when the appreciation is likely to affect the financial situation of the enterprise or the competitiveness of exports, the depreciation may cause market panic and run on foreign exchange reserves.

The Economic Observer: And what new situations have emerged in this process? How do you weigh the pros and cons?

Guan Tao: A very important aspect is that in recent years, after the central bank withdrew from the normal intervention of the foreign exchange market, many foreign exchange positions were not held by the central bank, but by enterprises and banks. Taking the trade surplus as an example, the enterprise did not sell all to the market, but became the foreign exchange deposit of the enterprise; there are also enterprises that sell foreign exchange to the market, and the surplus after settlement does not all become an increase in foreign exchange reserves, but is held by the bank.

This part, then, is the secondary "foreign exchange reserve", which is quite a reservoir – it can play a role in regulating supply and demand. When there is an oversupply or short supply in the market, there is a buffer effect, which does not immediately become pressure on foreign exchange reserves and has a regulatory effect. The supply and demand of the foreign exchange market is relatively balanced, and the imbalance is absolute. It is impossible to balance supply and demand at every point in time, and there will be a gap in the year. At this time, in the mature market, it is the banks that "swallow" foreign exchange.

In summary, to a certain extent, secondary reserves can also alleviate the pressure on the RMB exchange rate and "smooth" the volatility of the RMB exchange rate – when there are pro-cyclical extremes.

Of course, in general, we should enhance the flexibility of the RMB exchange rate, further give play to the role of the exchange rate as a "shock absorber" for regulating the balance of payments and absorbing internal and external shocks; continue to steadily promote the opening up of institutional finance, including the bond market, increase the transparency and predictability of policies, improve the liberalization and facilitation of transactions, and attract medium- and long-term capital inflows.

The Economic Observer: Observe that from the end of last year to the present, the central bank has not intervened in the market, right? We have also noted that the correlation between the RMB exchange rate and the US dollar index is currently stronger, but the negative correlation between the two is weaker.

Guan Tao: This is because, at the end of last year, we saw that the trade surplus hit a record high, and in order to avoid the situation of bulls stampeding on the end of 2020: at the beginning, they all saved not to sell foreign exchange, and in December 2020, they sold it intensively at one time, resulting in a surplus of nearly $100 billion in that month; in 2021, September began to sell slowly, and by december at the end of the year, the surplus was only more than $40 billion. This also disperses the pressure when selling foreign exchange, so the impact on the RMB exchange rate is also dispersed.

Since the beginning of this year, the situation has not been the same, because there is no annual closing effect, the trend of the RMB exchange rate basically still follows the mid-price quotation rule of strong US dollar and weak RMB. Of course, the supply and demand of foreign exchange supports the overall strength of the RMB exchange rate.

Three

The Economic Observer: Emerging markets have recently shown signs of foreign capital outflows, and financial crises have traditionally been caused by cross-border capital inflows and outflows. So, do you think there are risks in Terms of China's cross-border capital flows? As evidenced by this, the net error omission figure on China's balance of payments is relatively large. Some people even sighed: In the past two years, China's annual import and export surplus of 560 billion yuan, current account surplus of 200 to 300 billion US dollars, foreign capital has also flowed in large quantities, but the central bank's foreign exchange reserves have not increased, where have these surpluses gone?

Guan Tao: In fact, the change in foreign exchange reserve assets in the balance of payments does not reflect the supply and demand of foreign exchange, because on the one hand, it includes the increase in reserve assets caused by the operating income of foreign exchange reserves, which is not the income of the central bank's intervention in the market, and on the other hand, it cannot cover the situation that the market sells more foreign exchange for banks.

Balance of payments statistics are based on an accrual basis rather than a cash receipt and payment system, and trade in goods, current account balances, are not equal to the difference between foreign exchange supply and demand. The customs import and export surplus, regardless of whether there are foreign-related receipts and payments in the current period, should be recorded in the current account surplus according to the accrual basis. However, in the same period, the supply and demand relationship of foreign exchange is first affected by the foreign-related receipts and payments of trade in goods, and then it depends on whether the difference between receipts and payments is bought and sold in the foreign exchange market. Both belong to the concept of cash receipt and payment system.

For example, in 2021, the customs import and export surplus will be US$676.7 billion, the customs comparable caliber of bank goods trade in foreign-related receipt and payment surpluses of US$339.5 billion, and the settlement and sales surplus of FOREIGN exchange of US$336.5 billion. According to the accrual basis, the part of the foreign-related receipt and payment surplus of trade in goods that is less than the customs import and export surplus is recorded as the net outflow of "other investments" or the negative value of "net error and omission" in the financial account in the balance of payments.

Moreover, from a management point of view, you can only manage what you can see and touch, otherwise you will not be able to start. As for whether the "net error omission" is a capital outflow or capital flight, it does not affect the judgment.

For example, in the early days of the "8.11" exchange rate reform, the exchange rate depreciated and the reserves declined, and I combined the balance of payments analysis to include the net error and omission in the capital account income and expenditure, and came up with two important judgments: One is that regardless of whether the net error and omission are capital flight, it does not affect the capital outflow after the net error omission exceeds the current account surplus, resulting in a reduction in reserve assets, and the RMB exchange rate change has the attribute of overshooting asset prices The other is that short-term capital outflows with net errors exceed the underlying balance of payments surplus (the total balance of current account and direct investment balance), which is the main reason for the decline in reserve assets, while short-term capital is mainly driven by expectations, so stabilizing market confidence, especially in combination with the fact that net outflows under the capital account are mainly from the asset side (foreign investment), is the key to stabilizing the confidence of domestic enterprises and residents.

At the end of 2016, the Central Economic Work Conference proposed to maintain the basic stability of the RMB exchange rate at a reasonable and balanced level. To this end, I pointed out that the key to stabilizing the exchange rate lies in rebuilding the credibility of the exchange rate policy and stabilizing market confidence.

Economic Observer: China's opening up to the outside world has reached the deep water area of financial opening up, and the conflict between Russia and Ukraine has also intensified the flow of funds; at this time, our financial opening up, the steps and arrangements, including how to prevent and control risks in the process of opening up to the outside world, how to do it will be better?

Guan Tao: In fact, the 14th Five-Year Plan is very forward-looking. Although people at that time called for accelerating domestic financial opening and accelerating the internationalization of the renminbi at the time of the outbreak of the epidemic and Sino-US frictions, the 14th Five-Year Plan proposed to promote the internationalization of the renminbi steadily and prudently. According to Yi Gang, governor of the central bank, it is a trinity (opening up of the financial industry, capital account convertibility and reform of the RMB exchange rate formation mechanism).

In the process of opening up, it is necessary to continuously improve the ability of financial supervision. And the basis of regulation is data. Just like the net error omission problem mentioned earlier, putting it into the capital account only solves the problem of flow monitoring of the balance of payments, but still does not solve the problem of stock monitoring of the international investment position statement. Because it is not possible to decompose the net error omission into external financial assets or liabilities, this piece is not seen in the balance sheet of foreign financial assets (i.e., the international investment position statement).

This is what Yu Yongding, a teacher at the Chinese Academy of Social Sciences, proposed: the net error of more than one trillion yuan in a few years is omitted, and then the accumulated surplus of the current account does not respond on the balance sheet. More importantly, it is impossible to count, let alone monitor. Then, after further expansion of opening up in the future, if there is neither management nor data, the risk will be even more uncontrollable. Therefore, this capacity needs to be further strengthened by the collective wisdom and efforts of the whole society.

This exposes that our past statistical system needs to be improved. For example, there is a relatively large gap in balance of payments data based on an indirect reporting system. Indirect declaration is the collection of data by an enterprise in the process of handling business when it goes to a bank to do business. But now many transactions under capital are accrual, and without cash receipts and payments, if you don't go to the bank, the bank can't collect the data.

Even in the form of sampling surveys, taking trade credit (the credit behavior of import and export enterprises) as an example, from the perspective of the import and export of customs and the foreign-related receipts and payments of foreign exchange bureaus, the gap in foreign-related receipts and payments of trade in goods should be reflected in trade credit, but the two are far apart. For example, last year, the gap between customs imports and exports was nearly $300 billion, but in the balance of payments, the assets and liabilities of trade credit only increased by $1.1 billion, of course, some may be reflected in overseas deposits, but still far from enough to make up for this huge gap, and finally according to the debit and credit accounting method, it can only be put into the net error and omission negative value.

The Economic Observer: At a time when The Monetary Policy of China and the United States is misplaced, how big is the risk of cross-border capital outflows, and how can we deal with them?

Guan Tao: From the perspective of foreign exchange, from the perspective of the international investment position table, the risk at the national level is not large, because the external debt indicators and the degree of private currency mismatch have been greatly improved compared with the 8.11 exchange reform in 2015, and the anti-risk ability is very strong; and it has also withstood the test of market pressure, such as the RMB breaking 7 in August 2019; the RMB falling to around 7.2 in May 2020, just because the private foreign debt has been greatly reduced, so the market has not panicked and successfully passed the "peak of the flood".

Specifically, China's fear of the Fed's monetary policy adjustment does not mean that cross-border capital flows and rmb exchange rates will not fluctuate; China's overall non-risk of external debt repayment does not mean that individuals will not have difficulties in repaying foreign debts. Domestic enterprises should strengthen their awareness of risk neutrality and strengthen the management of foreign investment and financing, not only to ensure the safety of overseas assets, but also to prevent foreign financing risks.

Looking back at history, when the global financial crisis in 2008, we were less affected because we did not open up to the outside world, but now we have a high degree of financial openness to the outside world. Whether it is a private external financial asset, the ratio of external liabilities to GDP has increased significantly compared with the end of 2008; then the fluctuations in the international market and changes in global liquidity will inevitably affect our asset security and liquidity.

As the latest monetary policy implementation report of the central bank pointed out, the overall decline in macro policies in developed economies may not only be associated with financial risks of asset price shock adjustment, but also have obvious spillover effects on emerging economies through trade exchanges, capital flows, financial markets and other channels. Specific to the spillover effect on China, it can be refined into seven channels:

For example, to narrow the interest rate differential between China and foreign countries, to slow down foreign capital inflows; to stimulate capital returns, emerging markets under pressure; risk asset adjustment, rising risk aversion (if the market risk appetite declines, foreign holders concentrated cash out and leave the market, it will aggravate the volatility of China's domestic stock market, bond market and foreign exchange market), as well as slow down the global recovery, inhibit China's exports; tightening financial conditions, affecting overseas financing; global financial turmoil, threatening asset security [if global financial turmoil, including fragile emerging markets, "shrink panic", It will endanger the safety of China's assets (including claims) on the ground.

Finally, it "affects the price trend and restricts the operation of the central bank.". Further higher US Treasury yields could prevent China's market interest rates from falling. Either way, it will exacerbate market doubts and squeeze the operational space of China's monetary policy.

The Economic Observer: So, in terms of capital flow shocks, what are the main aspects?

Guan Tao: It should be noted that from another level, the impact of capital flows is not necessarily the impact on foreign exchange reserves, the impact on the RMB exchange rate, to a large extent, reflects the impact and fluctuations on the domestic financial market.

Although, the market share of foreign capital in the domestic financial market is not high. For example, the bond market and the stock market have 4% and 5%, and there is still room for growth, but the stock scale is relatively large. According to statistics from the People's Bank of China, by the end of last year, the total number of domestic RMB stocks, bonds, loans, and deposits held abroad was 10.82 trillion yuan, or about 1.70 trillion US dollars. If due to the tightening of the Federal Reserve, global financial turmoil, the great power game and other reasons, in order to reduce the risk exposure, the money concentrated outflow, I am afraid that it will trigger a shock wave in the domestic stock market and bond market.

The performance of the capital market in March was typical – because of the volatility caused by the reduction of foreign investment. The stock market, the bond market, and the foreign exchange market thus have a chain reaction. However, the currency market is relatively resilient, and as long as the exchange rate is flexible, it can absorb the impact.

Taking the Land Stock Connect as an example, although there is a quota every day, if foreign capital runs out of quota every day, the scale is quite large in a month. Therefore, the relevant departments should do a good job of scenario analysis and stress testing in this regard, set up the situation of the middle difference one by one, and make a good response plan. If we rely more on price means to clear the market and absorb shocks, we can reduce our dependence on administrative means. In addition, the exchange rate is flexible, up and down, which is largely conducive to smoothing the impact of foreign capital inflows and outflows.

The Economic Observer: If we take cross-border capital flows and the trend of the RMB exchange rate as clues, what kinds of scenarios can we distinguish the impact of the re-dislocation of Chinese and foreign monetary policies on China? And what are the countermeasures?

Guan Tao: In this regard, I have written about four scenarios or four stages. A. The spillover effect of currency tightening in advanced economies is moderate, china's foreign capital inflows have decreased, and the pressure on the appreciation of the RMB exchange rate has decreased. B. Greater monetary tightening in developed economies, intensified economic and financial shocks, staged capital outflows in China, a reduction in trade surpluses, and two-way fluctuations in the RMB exchange rate. Given the dilemma of central bank market communication and the double decline of fiscal and monetary stimulus, the probability of policy shifts in advanced economies triggering this situation is not low. C. The currencies of developed economies have tightened more than expected, triggering financial crises and recessions, china has experienced larger capital outflows, trade surpluses have widened, and the RMB exchange rate has weakened again. D. After the crisis, the developed economy has returned to monetary easing, and if China can maintain its global leading edge in economic recovery, it is expected to play a "safe haven" role, attract more foreign capital inflows, and the RMB exchange rate will be stronger.

Correspondingly, we can also have six countermeasures: 1, to maintain economic operation in a reasonable range; 2, to make good use of normal macro policy space; 3, to steadily and prudently promote the two-way opening up of finance; 4, continue to increase the flexibility of the RMB exchange rate; 5, guide domestic institutions to prevent foreign-related risks; 6, do a good job of spillover impact response plan.

In fact, there are different scenarios for the spillover effect of monetary tightening in advanced economies on China, and it is not all bad. The forecast is more important than the forecast. It is necessary to formulate a response plan on the basis of strengthening monitoring and analysis, improve policy response capabilities, and guide according to the situation, seek advantages and avoid harms.

The Economic Observer: Finally, in the past three decades, it seems that China's macro economy has never faced such high uncertainty as it does today; is there pressure to achieve the 5.5% GDP growth target this year?

Guan Tao: I think it is more difficult now than when the government work report was released in March. The GDP target itself is challenging, at 5.5 percent higher than the compound average of 5.1 percent last year and the year before. But it is precisely because it is challenging that it can send a stronger signal of steady growth.

Indeed, there are some new developments that will certainly cause a greater economic drag if we continue to exceed expectations; in addition, if our policies are not hedged sufficiently, the economy will also decline. Therefore, the clear policy must be done quickly, and the clear things must be done quickly. Including the possibility of worse situations in the future, it should be studied and prepared. It is still the sentence of the premier's forum: Macro policies should take the initiative, cope with difficulties, rely on the front, and step up their efforts at the right time.

Cooperation, copyright please contact Teacher Hua: 13641705556