On October 15, 2017, Zhou Xiaochuan, Governor of the People's Bank of China, gave a speech on China's economic prospects at the G30 International Banking Conference during his attendance at the International Monetary Fund/World Bank Annual Meeting in Washington. The main contents are as follows:
China’s economic growth has continued to slow in the past few years, and has continued to fall to 6.7% in 2016 after it fell above 10% in 2012 to around 8% in 2012. butSince the beginning of this year, the economic growth momentum has rebounded. The GDP growth rate in the first half of the year reached 6.9%, and it is expected to achieve 7% in the second half.The driving force for economic growth mainly comes from the rapid growth of consumption in the household sector. From January to August, the total retail sales of consumer goods increased by 10.4% year-on-year. Consumers gradually shifted from traditional commodities to services, so the service industry accelerated and the tertiary industry added value to GDP. The proportion has risen from about 40% 15 years ago to the current 55%. Economic growth has promoted overall employment stability, with about 10 million new urban jobs in January-August. This is also the rate of employment growth that China's huge population needs to maintain. At the same time, CPI increased by 1.8% year-on-year, PPI increased by 6.3%, and nominal GDP growth rate reached 9.5%.
From the perspective of money supply and credit data, since the beginning of this year, China has entered the process of deleveraging, and the growth rate of broad money supply M2 has continued to slow down, currently less than 9%. The overall leverage rate began to decline.Although the magnitude is not large, the trend has already taken shape. After the financial crisis, China began to implement a proactive fiscal policy and monetary policy to deal with the crisis. Therefore, the proportion of China's debt to GDP rose sharply in the two years after 2009, but it is worthwhile because the Chinese economy quickly recovered from the crisis. Now China needs to lower the leverage.
Thanks to the improvement of the external environment, China’s import and export performance has been good this year. The trade surplus of goods is 400 billion U.S. dollars, down 20% from the same period of last year. However, imports, especially service industries, have increased rapidly, and the current account surplus is expected this year. The share of GDP will fall to 1.2%. From an international perspective, China's balance of payments imbalance is relatively low.
About deleveraging.China's overall macro leverage is high. According to the department, the ratio of government debt to GDP is not high; the ratio of household sector debt to GDP is still at a low level, but it is growing rapidly; the main problem is that the proportion of corporate sector debt to GDP is higher. Thanks to the low interest rate environment, the current debt service ratio is still relatively reasonable. Many people may ask why companies have such high leverage, and why financial institutions, especially commercial banks, are willing to provide so many loans to businesses. One of the reasons is that many economists have pointed out that Chinese local governments have borrowed from various financing platforms to form more debts. This is statistically reflected in corporate sector debt, which will lead to overestimation of corporate sector debt. If this part is counted as government debt, corporate sector debt will fall sharply, government debt will rise accordingly, and this debt structure will be more balanced. Therefore, looking at China's leverage ratio depends not only on the debts of corporate sectors such as state-owned enterprises and bank credit issues, but also on local government debt issues, which are related to the promotion of urbanization. The International Monetary Fund's Article 4 Consultation Team also made recommendations to us. We should seriously study the intergovernmental fiscal relationship and reform the division of central and local fiscal revenue and expenditure.
About overcapacity and urbanization.China has begun to cut excess capacity in the steel and cement industries. There are two main reasons for overcapacity in these industries. One is large-scale infrastructure construction, and the other is urbanization, which requires a large amount of steel and cement. China's infrastructure has been greatly improved, but the urbanization process is still in progress. From the perspective of registered household registration population, the current urbanization rate is only about 40%; however, according to the results of the population survey, the urbanization rate is about 50%; if the sample analysis method is used to count the population living in urban areas for six months, then The urbanization rate is 57%. This means that a large number of farmers are still moving to the city. Although these people may have found jobs in the city, they have not yet settled in the city. Therefore, China's urbanization process is still at a high-speed development stage, resulting in a large demand for steel and cement. The Chinese government wants to promote structural reform and optimization, and attaches great importance to environmental protection, so it voluntarily cuts steel and cement production capacity by 10%. At present, the de-capacity has achieved positive results and is expected to achieve the set goals.
Regarding the transfer of comparative advantage,At present, many labor-intensive industries in China have been transferred to ASEAN and Southeast Asia. More and more Chinese investors have invested in Africa and transferred some industries to Africa. Therefore, the proportion of the service industry in the Chinese economy is growing, which is a very good phenomenon. However, there is still a problem of insufficient competitiveness in the service industry. Although there are some advantageous industries, the medical education and other industries are still weak, and further efforts are needed.
About financial stability. The National Financial Work Conference in July this year decided to establish the Financial Stability Development Committee, and will focus on four issues in the future. The first is shadow banking.In fact, we started to deal with this problem two years ago. At present, we have made positive progress. Many shadow banking businesses have returned to the banking sector and have been included in the balance sheet of commercial banks.The second is the asset management industry.This issue is more complicated. The regulatory authorities of the China Banking Regulatory Commission, the China Securities Regulatory Commission and the China Insurance Regulatory Commission may have different regulatory requirements for the same asset management behavior. We agree with the relevant recommendations of the Financial Stability Board and should streamline and streamline the asset management industry. Supervision.The third is Internet finance.At present, many technology companies are beginning to offer financial products. Some companies have obtained licenses, but some have not provided any licenses but still provide credit and payment services and sell insurance products, which may bring competition problems and financial stability risks.The fourth is the financial holding company.We have observed that some large private companies obtain various financial service licenses through mergers and acquisitions, but they are not financial holding companies in the true sense. There may be illegal transactions such as connected transactions, and we have no corresponding regulatory policies for these cross-sector transactions.
In the future, we will further deepen reforms and gradually push the economy to leverage. At the same time, strengthen financial supervision and coordination, promote the stable and healthy development of the financial market, and maintain financial stability.
David Marsh, President of the International Monetary and Financial Institutions Official Forum (OMFIF), asked:Some people say that there is a “leadership vacuum” in the world. Do you think this is the time for China to enhance leadership in the reform of the international monetary system? In your speech, you mentioned the positive performance of the Chinese economy. This seems to provide an opportunity to promote China's proposition when discussing the reform of the reserve currency system, the role of special drawing rights, and the normalization of the currency swap mechanism.
A: In recent years, with the rapid development of China's economy, China has begun to play a certain role in international economic governance, including participation in the formulation of the reserve monetary system reform and trade and financial stability. However, China still focuses on solving domestic problems, including how to continue to promote economic development and promote regulatory reforms, so as to keep pace with global development.
It is a pleasure to see the International Monetary Fund's inclusion of the renminbi in the SDR currency basket. This is encouraging and will encourage China to further promote reform and opening up and better play the role of the renminbi as a freely usable currency. Although China has actively strengthened its cooperation with the International Monetary Fund, the Bank for International Settlements and the Financial Stability Board and participated in the standard setting work, there is still a long way to go to play a greater role.
Currency swaps are an unexpected product of the global financial crisis. At the beginning of the global financial crisis in 2008, due to the lack of hard currency, the bank's development agency relationship also faced difficulties. The neighboring countries proposed to sign a local currency swap agreement with China to support regional trade development and facilitation. At first it was some economies in South Korea, ASEAN and Central Asia, and later gradually expanded to other parts of the world, such as Argentina, Ukraine and Egypt. Therefore, the currency swap mechanism can be said to be an unexpected product of the financial crisis. China supports the further development of a global safety net, which may be more effective than bilateral arrangements.
Bill Rhodes, former president of Citibank, asked:Last year, you expressed concern about the rise in China’s debt-to-GDP ratio, but I feel that you are more optimistic about China’s debt problems this year, and the Chinese government is actively taking measures to deal with the debt problem. Do not know if the above judgment is correct?
A: Regarding the debt problem, it should be noted that in the process of urbanization, there are problems such as low fiscal transparency, intergovernmental fiscal relations to be rationalized, and lack of clear fiscal discipline to restrict local governments. Therefore, the pricing of local government bonds in financial markets There are distortions, and the pricing of loans to local government financing platforms is also distorted, which has led commercial banks and the financial sector to underestimate local government fiscal risks. I believe that these problems will be gradually solved and the financial market will become more transparent and healthy. The National Financial Work Conference held in July this year also emphasized the need to pay attention to government debt risks. At the same time, it should be noted that compared with private sector debt and external debt, government debt risk is low, and we will actively respond to relevant issues by promoting fiscal reform.