Guan Tao suggested promoting the internationalization of the renminbi from seven aspects: the renminbi ranks third in the weight of the SDR, and there is room for catching up

"China's economy is now very large, the scale of trade, investment and financing is relatively large, and the investment status and potential are relatively different." The renminbi is the third most weighted currency in the SDR, accounting for 10.9%, and we have room to catch up. On July 24, Guan Tao, global chief economist of BOC Securities and former director of the Balance of Payments Department of the State Administration of Foreign Exchange, said at the "2021 Qingdao-China Wealth Forum".

Guan Tao, Global Chief Economist of BOC Securities and Former Director of the Balance of Payments Department of the State Administration of Foreign Exchange

Guan Tao proposed to promote the internationalization of the renminbi from seven aspects:

The first aspect is to accelerate the construction of a new development pattern and achieve high-quality development through supply-side reform and high-level opening up. From the pursuit of economic growth in the past to the quality of economic growth, only by doing a good job in the economy can the currency go far and go abroad.

The second aspect is to make the market deeper, more thorough, deeper, and more liquid, especially in the foreign exchange market, which is currently the eighth largest trading volume in the world.

The third aspect is to improve our level of opening up to the outside world, and we must shift from the opening up of the liquidity of commodity elements in the past to the opening up of institutional opening up. At the same time, Guan Tao pointed out that opening up should be as stable as possible to seek progress and avoid the repetition of policies.

In the fourth aspect, accelerate the construction of a modern fiscal and taxation financial system, improve the efficiency of key research and regulation, promote the healthy and stable development of the economy, and at the same time improve policy transparency and credibility, maintain the purchasing power of the renminbi, and enhance the international attractiveness of the renminbi.

In the fifth aspect, there should be a differentiation, in the process of the RMB going abroad, through the construction of the system, the improvement of infrastructure, to create a more convenient and more market-friendly environment for the cross-border circulation and use of the RMB.

Sixth, adhere to innovation and development, accelerate the transformation of foreign trade development mode, from winning by price to winning by quality. So far, less than 15% of cross-border trade has been settled in RMB, and the important reason is that our enterprises have no bargaining power and lack bargaining power.

The seventh aspect, in accordance with the "14th Five-Year Plan", to improve the risk prevention and response capabilities in the open environment, we must improve our regulatory means, from the past number of administrative approvals to the main special macro and micro combination. There is also the strengthening of international statistical monitoring of flows.

For the moderator, the moderator asked, how to see the impact of passive distortion on the global asset management market?

Guan Tao believes that any policy choice has advantages and disadvantages, the advantage is that he can pass on the crisis, the dollar in international positioning is greatly reduced, but the global dependence on the dollar is very large, the United States can use economic sanctions to hit competitors, Americans can borrow money and not pay back, can maintain a double deficit. Of course, the biggest problem is that it has fostered excessive consumption in the United States, which has brought many problems, and the gap between rich and poor caused by the excessive prosperity of the virtual economy has been created.

Now the Fed's monetary policy objectives have changed somewhat, originally emphasizing only price stability, and after the 2008 crisis, it began to focus on employment targets. This time, due to the public health crisis, which places more emphasis on employment targets, the Fed's monetary policy takes into account domestic employment, growth, and price stability. Whatever policy the Fed adopts, it has a beneficial impact on the whole world, and any country is concerned.

The following is a transcript of some of the statements:

Guan Tao: I am very happy to participate in the Wealth Forum again, last year I discussed the issue of institutional opening-up, and today I will combine the study of the "14th Five-Year Plan" outline to talk about the idea of financial opening up. In reality, I often hear a problem, China's economy is now very large, the scale of trade, investment and financing is relatively large, and the investment status and potential are relatively different. The renminbi is the third most weighted currency in the SDR, accounting for 10.9%, and we have room to catch up. Of the five currencies of the International Monetary Organization's Special Drawing Rights, only the international share of the US dollar exceeds its weight, why is this so? It is worth everyone's deep thinking. In the international monetary system, there is a path dependent on network effects, the old international currency, we use more after the formation of habits, the more used transaction costs are lower, the habit after the formation of unless there is a big impact, we will not change trading habits casually. In many indicators, the weights of the dollar and the euro are thirty or forty or even forty or fifty percent, both double digits, and the third and fourth places are only single digits, which is not the same thing at all. Why does the dollar have more weight than economic influence? I think it is very important that the DOLLAR asset is a very deep, wide financial market, and it is very convenient for everyone to hold. Another reason is that most of the international currencies have a relatively high degree of local financial openness, with three important signs, free entry and exit of funds, free conversion, and free floating exchange rates.

Compared with our potential, the internationalization of the RENMINBI has room to catch up, and the degree of openness, development and supervision of our financial market are compatible with objective reality.

I think that to promote the internationalization of the renminbi from seven aspects, the first is to accelerate the construction of a new development pattern and achieve high-quality development through supply-side reform and high-level opening up. Because the downward trend of China's economic growth rate may be the trend of the times, the economic volume is so large, it is impossible to grow as high as before, in this case, from the past pursuit of economic growth rate to the quality of economic growth, only by doing a good job in the economy, the currency can go far and go abroad. The second is to make the market deeper, more thorough, deeper, more liquid, especially the foreign exchange market, we can't even say that the renminbi is the eighth in the world in terms of trading volume. The third is to improve our level of opening up to the outside world, from the past commodity element liquidity opening to institutional opening, our opening up as far as possible to seek progress, to avoid the repetition of policies, I and Mr. Chen's views are a little different, he feels that it can be fast, I think do not open for the sake of opening up, do not rush, the future will be backwards. In addition, we must improve the legal level and form an open, stable, and predictable institutional environment, and the highest international standard is the negative list, which has a great impact on our opening up, not the kind of opening up that is really habitually accepted in the world. In the fourth aspect, accelerate the construction of a modern fiscal and taxation financial system, improve the efficiency of key research and regulation, promote the healthy and stable development of the economy, and at the same time improve policy transparency and credibility, maintain the purchasing power of the renminbi, and enhance the international attractiveness of the renminbi. Why people choose to hold you, there must be a different place, the world's major central banks are engaged in unconventional monetary policy, we maintain the positive income of RMB assets, which is of great help to the emergence of the RMB. The fifth aspect is that we should also have a differentiation, in the process of the RENMINBI going abroad, through the construction of the system, the improvement of infrastructure, to create a more convenient and more market-friendly environment for the cross-border circulation and use of the RENMINBI. The sixth aspect is that we must adhere to innovative development, accelerate the transformation of foreign trade development mode, from winning by price to winning by quality, our cross-border RMB pilot is started from trade, which is encouraged in terms of policy, so far, cross-border trade is settled in RMB denominated less than 15%, not that there are obstacles in our policies, and the very important reason is that our enterprises have no bargaining power and lack bargaining power. Our economy and foreign trade last year are growing positively, from the customs data, our terms of trade in the first four months of this year are deteriorating, imports are rising in price, the price index of exports is stable and priced, reflecting our lack of pricing power, affecting your settlement in local currency. The last one is to improve the risk prevention and response capabilities in the open environment in accordance with the "14th Five-Year Plan", improve our regulatory means, and combine the number of administrative approvals from the past to the macro and micro of the main special project. There is also the strengthening of international statistical monitoring of flows.

Host: The Fed is under a lot of pressure, and the suppliers of global liquidity also have to take into account the domestic US, that is, inflation, employment rates must also be considered, resulting in passive, passive distortions that affect the global asset management market.

Guan Tao: The United States is a central currency one by one, the United States can raise international financing in case of an accident, but other countries cannot, the renminbi is climbing from a peripheral currency to a sub-central currency, and it is unrealistic to internationalize the US dollar and the RENMINBI, and there is a long way to go. Will the Fed be tired? Any policy choice has advantages and disadvantages, the advantage is that he can pass on the crisis, the dollar is greatly reduced in international positioning, but the global dependence on the dollar is very large, the United States can use economic sanctions to hit competitors, Americans can borrow money without repayment, can maintain a double deficit. Of course, the biggest problem is that it has fostered excessive consumption in the United States, which has brought many problems, and the gap between rich and poor caused by the excessive prosperity of the virtual economy has been created. As far as the Fed itself is concerned, it will pay attention to the global liquidity situation, with the decline in the international influence of the United States, this and the other, the United States can not be so humane, sometimes its monetary policy in some cases need to consider the impact of overseas factors, such as 2015 should have raised interest rates earlier, due to the oscillation in overseas markets to the end of the year to raise interest rates, most of the time will not consider overseas impacts. Another very important thing is that now the Fed is indeed some changes in monetary policy objectives, the original only emphasis on price stability, after the 2008 crisis began to pay attention to employment goals, this time due to the public health crisis more emphasis on employment targets, the Fed monetary policy is more introverted, considering domestic employment, growth, price stability. Whatever policy the Fed adopts, it has a beneficial impact on the whole world, and any country is concerned. The 2008 financial crisis Fed how to do everyone is very painful, until now has not found a better solution, the Fed can not sacrifice themselves for overseas factors, although to strengthen the macro coordination of international policy, in essence, at least in monetary policy is very difficult, the Fed gave a lot of specious signals to let you guess, will not let you get more information.

Hosted by Qingdao Municipal People's Government and hosted by Caijing Magazine and Caijing Think Tank, the 2021 Qingdao-China Wealth Forum was held in Qingdao, China, from July 24 to 25, with the theme of "New Era, New Wealth, New Management".

(The views of the guests are based on the on-site speeches, and are not confirmed by the spokesperson himself)