加布里埃尔• 斯坦

中国人民大学重阳金融研究院外籍高级研究员

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  货币金融机构官方论坛首席经济顾问,斯坦兄弟(英国)宏观经济评论员和预测员,牛津经济研究院特别顾问。主要研究方向为世界宏观经济、货币联盟、养老金政策、地区经济平衡。

Editor`s Note:

 

Accelerating yuan convertibility is one of the key reform proposals in decision approved at the Third Plenary Session of the 18th CPC Central Committee. But in an economy the size of China`s, it is inevitable that reform will encounter difficulties. The authors of a recent report on the subject, Capital Account Liberalization in China: Guidelines from Global Experience, Wang Wen (Wang), executive dean of Renmin University`s Chongyang Institute for Financial Studies, and Gabriel Stein (Stein), chief economic adviser to the London-based Official Monetary and Financial Institutions Forum, shared their thoughts at a recent forum.


Q: Do you see the liberalization of China`s capital account as necessary for China`s development? If so, why?


Wang: Yes. Since 1978, China began to gradually loosen foreign direct investment regulations that allowed for the establishment of the first foreign invested enterprise.


In the early 1980s, the Chinese government created 10 foreign borrowing enterprises, which unified financing from international financial markets, in order to satisfy the demand for imports.


In 1985, the government eliminated internal trade settlement pricing, and began to enforce a single exchange rate for the yuan. This was very influential, and the de facto starting point of the liberalization of the yuan capital account.


From the beginning, although China began to open the capital account very slowly, it was always very beneficial to China`s development.


Stein: Capital account liberalization is the next necessary step for China, especially if China wants the yuan to become a regional or international reserve currency. This cannot happen without liberalization. Liberalization is also good for rebalancing and moving away from financial repression to a greater share of household consumption in GDP.


Q: How far has the experience of other countries been taken into account by the Chinese authorities during the nation`s reform and opening-up?


Wang: China is always good at learning from other countries. Since 2008, a very important lesson for China is that in the process of promoting capital account liberalization after the financial crisis, China has to focus on monetary security and financial security.


China will acclimate to the rhythm of capital account liberalization according to its economic development needs in terms of international markets and in terms of resource allocation.


That`s why since 2009, China has launched cross-border trade settlements in yuan.


Stein: Moving toward advanced economy status, China can learn a lot from Israel, because it underwent a similar process, shifting from socialism to the free market in stages.


Q: What do you see as the main concern for China in its capital account liberalization?


Wang: There are two main concerns. One is the constraints on the capital account and capital flows. During the current international economic restructuring, China has incurred high costs.


Second, in China there are a considerable number of people who are fearful about China`s domestic capital account liberalization, and worry that it might force the country to repeat the mistakes of Thailand and other Southeast Asian countries in the 1990s.


The Chinese government is still very careful on the issue of capital account liberalization.


Stein: The key thread is to move gradually with proper sequencing of the loosening of controls, and to create a sound financial system in place with realistic regulation, so as to get control over the shadow banking and excess borrowing by local authorities.


The Israel example shows that with proper planning and deliberation, capital account liberalization can be accomplished without any crisis.


Q: With the transformation in China`s economic model from an export-based to a domestic consumption-based model, is foreign investment as important as it was previously?


Wang: Foreign investment is still as important as before. With the US Manufacturing and Innovation Act, a number of multinational companies have begun to shrink their investment in China and have shifted production to the US.


China is currently in the transition period. The pressures of eliminating pollution and protecting the environment are overwhelming, justifying an adjustment in its stock of assets.


International financial securitization and direct financing in international markets are the main channels for capital flows. They have the advantages of simplicity and low cost.


Stein: China is faced with a mathematical issue: Household consumption must grow faster than nominal GDP in order to increase its share of GDP. It now stands at 35 percent to 40 percent of GDP.


For this to increase, it must grow by about 10 percent per year, which is very strong indeed, and takes nominal GDP growth to at most 3 percent to 4 percent. The growth of household consumption must be significantly faster than other parts of the economy.

 

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