Huang Qifan: are developed economies cutting interest rates with China?

category:Finance
 Huang Qifan: are developed economies cutting interest rates with China?


Huang Qifan, CF40 academic consultant and vice president of China International Economic Exchange Center, said at the 4th China New Financial Summit Forum on December 1 that the proper reduction of Chinas real loan interest rate is totally different from the reduction of developed economies to zero interest rate and the adoption of loose monetary policy, which should not be mixed.

He said that Chinas benchmark interest rate is 4% - 5%, and the interest rate of small and medium-sized enterprises is 6% - 7% or even more than 10%. In this case, according to the market-oriented interest rate formation, transmission and regulation mechanism promoted by the central bank, it is a realistic consideration to promote the loan interest rate to fall more.

However, developed economies, especially developed countries such as the United States, such as competitive zero interest rate, quantitative easing policies, loose money without a bottom line, are harmful in the long run. We must not follow their path. Huang Qifan stressed.

The following is the real record of Huang Qifans speech:

I would like to make four comments on the difficulty and high cost of financing in the real economy of small and medium-sized enterprises.

First, recently, the National Bureau of Statistics announced that CPI in October increased by 3.8% year-on-year, and PPI increased by 1.6% year-on-year. In the long run, in contrast, the deposit interest rate of the common people has decreased and the loan interest rate of the enterprises has increased.

In order to attract people to better maintain stable savings, increase deposit interest, consider reducing the burden of enterprises, and reduce the loan interest of enterprises, it is a realistic consideration to promote the loan interest to fall more in accordance with the market-oriented interest rate formation, transmission and regulation mechanism promoted by the central bank in order to stabilize the economy, growth and financial development next year.

Considering the interest reduction, we usually raise several concerns:

(1) if the interest rate is now reduced by 0.0% or 1%, will it encourage real estate speculation?

The reduction of benchmark interest is facing the real economy and the whole national economy. In this sense, real estate regulation is only a small part. There are various economic measures to stabilize real estate, which is used for housing rather than speculation. They are not controlled by monetary policy alone.

(2) now developed economies are cutting interest rates. Is China following them?

Developed economies, especially the United States and other developed countries, had already achieved about 1% of the real interest rate, and then reduced it to zero or negative interest rate. In the long run, their competitive zero interest rate, quantitative easing, and loose money without a bottom line are harmful. We must not follow their path.

However, this is different from what we said about the appropriate reduction of the current real loan interest rate. They are going from 1% to 0% and to negative interest rate, while our benchmark interest rate is 4% - 5%, the interest rate of small and medium-sized enterprises is 6% - 7% or even more than 10%, and 15% and 20% of shadow banks are going out. In this case, we should reduce it a little bit more appropriately. We should not mix the two things of reducing interest rates and loose money with the Americans.

(3) around the possible economic difficulties or negative impact of international finance, we need to leave more room for monetary policy instruments, which is very important and correct. At present, many small and medium-sized enterprises have been more difficult, and policy space can be used in a timely manner.

In fact, the interest margin of our financial deposits and loans in China is very high. It may be reasonable for our financial GDP to account for 5% of the total GDP. The extra 2-3 points, equivalent to 2-3 trillion yuan, will be better if returned to the real economy. The government grants 1 trillion yuan and 2 trillion yuan in fiscal policy every year. It should be said that the use of this tool is enough. Next, if the financial industry falls one point, all kinds of enterprises in the national economy will reduce the cost by more than 100 million yuan. This can be done.

Second, Chinas financial problems and the real economy of small and medium-sized enterprises are not only total and cyclical, but also structural and institutional. Monetary policy is a total policy, which is effective for cyclical problems and not for structural problems.

All structural and institutional problems should be solved mainly by the supply side structural reform and the financial supply side structural reform proposed by the central government. We should implement the central governments policies, measures and strategic requirements in this regard. The supply side problems are often fundamental, structural and institutional, involving the institutional supply of monetary policy, the institutional supply of capital market, and the institutional supply of financial enterprises.

If the structural and basic problems are not solved by root reform, it is also difficult to adjust by cyclical and aggregate monetary policy. Therefore, we need to strengthen the structural reform of the financial supply side and solve them from the basic system.

Third, in the past two years, the one bank, two meetings have formulated very good, comprehensive and healthy programs in accordance with the requirements of the central government in the adjustment of asset management business, and have achieved phased results in promoting implementation. At present, the problem is not in the asset management policy and financial supervision policy, but in the program itself, it is very thoughtful and complete. However, in terms of operation rhythm, it is necessary to have pertinence. In the process of implementation, it is necessary to avoid the tendency of simplification of the implementation links, the tendency of layer by layer transmission and code addition, and the phenomenon of superposition and resonance of different department schemes at the same time.

Fourth, the difficulty and high cost of financing of SMEs are not only the problems of financial enterprises, but also the problems of inadequate real economic credit of SMEs. Credit is not in place, financial institutions naturally and instinctively need to avoid loans, so the key lies in the fundamentals of enterprises and the high debt of enterprises themselves.

The debt ratio of many entities is not 50%, 60%, but 80%, 90%, even insolvency. Many enterprises, when they are in a good cycle and with good benefits, are in full bloom and everywhere. When they encounter difficulties, they will go bankrupt or close when the capital chain is broken, or all kinds of problems will arise. Therefore, we should do a good job in policy guidance, and warn enterprises to avoid the phenomenon of high debt, overcapacity, full inventory, and poor market turnover, avoid the phenomenon of four strikes, all over the bow, and all over the hand, avoid the phenomenon of too many links and series operation of the project, and avoid the phenomenon of focusing on high expectations and doing unfamiliar things. In a word, if we do a good job in these four aspects, especially in the fourth aspect, then the problem of financing difficulty and financing cost of our whole small and medium-sized enterprises can be solved better. (the author is CF40 academic consultant and vice president of China International Economic Exchange Center) source: First Financial Editor: Wang Xiaowu NF

The debt ratio of many entities is not 50%, 60%, but 80%, 90%, even insolvency. Many enterprises, when they are in a good cycle and with good benefits, are in full bloom and everywhere. When they encounter difficulties, they will go bankrupt or close when the capital chain is broken, or all kinds of problems will arise. Therefore, we should do a good job in policy guidance, and warn enterprises to avoid the phenomenon of high debt, overcapacity, full inventory, and poor market turnover, avoid the phenomenon of four strikes, all over the bow, and all over the hand, avoid the phenomenon of too many links and series operation of the project, and avoid the phenomenon of focusing on high expectations and doing unfamiliar things.

In a word, if we do a good job in these four aspects, especially in the fourth aspect, then the problem of financing difficulty and financing cost of our whole small and medium-sized enterprises can be solved better.

(the author is CF40 academic consultant and vice president of China International Economic Exchange Center)