How Do I Become an International Economist?

Xu Xiaonian, born in 1953, is currently a professor of economics and finance at China Europe International Business School, a senior economist in Asia Pacific at Merrill Lynch and a consultant to the World Bank. He has won the Sun Yefang Economic Science Award, the highest award in China's economics circle. Mr. Xu is frank and dare to speak. Under his seemingly striking remarks, the independent spirit of economists and the most simple market economic principles are hidden.

Xu Xiaonian

(economist)

Graduated in 1975

Never savior

He has won the Sun Yefang Economic Science Award, the highest award in China's economics circle.

Xu Xiaonian on China's stock market

Xu Xiaonian denied that the current round of China's stock market was caused by the appreciation of the yuan. He believes that the valuation of assets has basically nothing to do with the currency value. Most investors invest and spend, and the asset portfolio is renminbi. Therefore, appreciation of the renminbi should not cause readjustment and reconfiguration of assets. Only when investors hold USD assets will such adjustments be triggered. The appreciation of the RMB will increase the willingness of foreign currency asset holders to purchase A shares, but so far foreign currency holders have only come in through QFII and underground pipelines, and the number is limited.

Xu Xiaonian Xu Xiaonian said that these savings funds should be converted into physical investment through various channels. However, due to the limitations of our existing financial structure, funds are mainly flowing into the banking system, while other channels are either not smooth or too narrow. A large amount of funds has been accumulated in the bank, and the bank wants to release it, but cannot release it all. So there is excess liquidity within the banking system. Banks feel pressured and have a strong willingness to lend. The problem reflected by the excess liquidity is not that monetary policy is too loose, but that the policy cannot meet the needs of economic development, so excess liquidity is structural, institutional, and not cyclical.

Therefore, to alleviate the problem of excess liquidity, it is necessary to increase the supply of non-bank assets, such as real estate, such as private equity funds, such as insurance products, such as corporate bonds and equity primary market issues. "Real estate should not only be suppressed, but also vigorously developed to accelerate the supply of real estate, rather than suppress prices. If such problems cannot be solved, funds will still be squeezed in the banking system." Xu Xiaonian said.

Xu Xiaonian speaks at the Boao Forum

In the 21st century, the rhetoric of conquering nature has been less and less heard. A few decades ago, that was the most popular slogan. Jun does not see, "The purpose of human beings to understand nature is to transform nature", "drinking the mountains and bowing their heads, the rivers make way." What best embodies the worship of human self-will is "fighting with heaven, endless joy; fighting with earth, endless joy; fighting with people, endless joy".

The expansion of the human mind began with the industrial revolution. In the thousands of years before, the power that humans could control was limited to their limbs, animal power, simple wind and water power. In less than 200 years after the Industrial Revolution, humans quickly passed the steam, electricity, and fossil fuels into the nuclear age. The nuclear weapons created so far alone are enough to destroy the world many times!

The rapid advancement of science and technology and the tremendous development of productive forces are reversible, thinking that they have truly become the masters of the world and the universe. They have the ability to transform nature in accordance with their own will. To achieve human purposes, they can and can rearrange the natural order.

Nature ruthlessly retaliates against humans. When the lungs are filled with polluted air and heavy metals are deposited in the stomach, the human mind begins to cool, and arrogance and ignorance gradually fade. ", Become the fashionable language of the new century.

With the development of science, there are always things that humans cannot understand. As small as the elementary particle, people are still indifferent to its internal structure; as far as the universe is concerned, every new discovery brings more unanswerable questions. The hardest thing to grasp is the consequences of human activities. The larger the scale of human activity, the more energy it consumes, and the stronger the impact on nature, the harder it is to predict its consequences. The Aswan dam was built in Egypt. Who would have expected that the Nile Delta in Woye, a thousand miles away, became a saline-alkali beach? When countries around the world are racing to achieve industrialization, who would think of today

Xu Xiaonian global warming?

What science cannot explain is left to philosophy; what philosophy cannot explain is left to religion. There are many religions in the world, Buddhism, Islam, Christianity, as well as unknown, personal beliefs. What religion has in common is the recognition of human limitations and the resulting awe, the Buddha, Allah, God, and nature. Human beings will not stop understanding nature, but the purpose is no longer to transform nature, but to conform to the natural market.

There are hundreds of millions of consumers in the market, and personal income and taste vary widely; there are tens of millions of companies in the market, each with different funds, technologies, and products. To control the market, one must grasp the information of each consumer and each enterprise, and secondly have the means to control each consumer and each enterprise. Even a strong government dare not claim to possess such a capability. This matter is beyond human power and can only be left to God. God in the economy is the market.

Why are the bureaus of this ministry still busy managing this and that? With the performance of busy promotion, only senior officials can have great wealth and more rents can be found. Of course, the market economy is inseparable from the government. The government's responsibility is to define and protect property rights, implement laws and regulations, and provide social security, including life guarantees for low-income groups. However, these serious matters now account for only a small part of the cardinal affairs.

Can't control the individual, can't it control the macro? Greenspan's regulation of the US economy was once described as nearly perfect. The technology bubble burst in 2000, the "911" terrorist attack in 2001, and the old man made a swift decision and printed large banknotes. At the time of the crisis, he saved the economy and the Republican Party of Bush. Cheers did not fall, and excess liquidity entered the real estate market, creating the biggest post-war bubble and the global financial crisis. Knowing this, why bother?

The "modest easing" of our monetary policy in 2011 is no less than the water release in Georgia's old year. As a result, the property market soared and CPI inflation. In the past two days, they discussed "quitting" and discussed how to put out the fire that they ignited. What toss?

The premise of macro-control is to accurately predict economic trends and accurately predict the response of enterprises and individuals to policies. This is more difficult than estimating the impact of human activities on nature. Nature is unconscious and passive, but man is subjective. Nature can't help but accept human destruction, but humans have various ways to deal with regulation. Scientists have not yet foreseen the consequences of the Aswan high dam, and Ge Lao's miscalculation is reasonable. After all, the governor of the central bank is also a common man, he is not a god.

In the face of market ignorance, one needs to be in awe, and the best policy is "quiet and inactive." "Do nothing and do nothing".

People do not stop studying the economy, the purpose is not to control the market, but to conform to the market.

Xu Xiaonian about house prices

The reason for the rise in house prices is simple: demand is greater than supply, or supply is less than demand.

There are long-term factors that affect demand, such as urbanization, an increase in the marriage-age population, and an increase in income. Urbanization and population changes are slow, and income growth is roughly in line with GDP, which is 8% to 10% per year. These three long-term factors are important, but they cannot explain the skyrocketing housing prices in the short term.

Of the short-term factors that determine demand, the most important is the money supply. The broad money M2 increased by 27.7% in 2009, and nominal GDP grew by only 6.7% in the same year. In plain but not strict terms, the real economy doesn't need that much money. Where does the extra 20 percentage points go? Property market and stock market. It s like transfusion to a patient. Once it exceeds the body's needs, it will inevitably be on the face, legs, and hips.

Xu Xiaonian Bumping up, economics is called "bubble".

The extra money mainly enters the property market through loans. Not only are mortgages easy to borrow, real estate developers' development loans are not a problem, but the money lent to industrial enterprises is converted into corporate profits and your income. Income has increased, and "satisfaction is thought of as food and clothing." Sexual desire must have a place to live, and the demand for home purchases has risen. Please note that the increased income is not the value created by the company and you, but just a pile of paper printed by the central bank and passed to you by the commercial bank. Anyway, the image of Chairman Mao is printed on the paper, and you can buy 100 yuan with it. With the flood of loans and banknotes, land prices and house prices skyrocketed.

There is another channel for the impact of currency oversupply on home purchase demand. Although indirect, it is no less important than the direct effect, which is inflation expectations. With so many tickets issued, inflation will happen sooner or later. In order to prevent the depreciation of savings, the people have made deposits and purchased real assets. In addition to gold, the real assets that can be bought are houses, so is there no reason for house prices to rise?

Look at the supply side again.

There are two things that have the greatest impact on short-term supply: the macro tightening in 2007 and the international financial crisis in 2008.

Xu Xiaonian With the decline in demand and the danger of a broken capital chain, real estate developers have to reduce the scale of development, resulting in insufficient supply in 2009. No one expected that the money supply in 2009 will release days in a few months, but real estate development takes time, and the supply cannot immediately keep up. The demand for monetary stimulus has been unsatisfactory, and the huge buying impulse has all been released to the price.

Some people say that in 2007, the macro-control was too urgent and the intensity was too great, but it is not true. As early as in 2005 and 2006, the economy had already shown signs of overheating, and then it was necessary to tighten appropriately. GDP at the decision-making level is in command and has been slow to move. At the turn of 2007-08, when CPI inflation was running in double digits, he hurriedly dropped the medicine. Unexpectedly, in the second half of 2008, he caught up with the financial crisis and then made another 180-degree turn. This is evident from the unreliable macro-control. Since this is not the subject of this article, it will not be discussed here.

The property market is like the stock market. The stronger the demand, the more the sellers reluctant to sell. As supplies become tighter, developers are scooped up as targets, just as "expensive medical treatment" is blamed on doctors receiving red envelopes. Why do developers cover the plate? The reason is exactly the same as that of farmers during the poor harvest year-prices are expected to rise. Why bullish? Developers are right. Under the pressure of inflation, buying a house is the best way to protect the value of household savings. This is back to currency oversupply and inflation expectations, which on the one hand stimulate demand and on the other hand reduce supply.

The most important factor determining the long-term supply of real estate is, of course, land. Under the current policy, land supply has been capped, and the red line of "1.8 billion acres" of agricultural land has become a veritable high-voltage line that cannot be touched. If we stick to this red line, there will be less and less land that can be developed, and more and more people. The residents naturally think that "real estate is always a scarce resource." Under this red line, real estate developers are busy hoarding land because "land will always be a scarce resource", and increasingly scarce land is equivalent to insuring housing prices. What are the consequences of bullishness on both the buyer and the seller? House prices are not the highest, only higher.

Analysis of demand and supply is clear, and there is a way to stabilize housing prices. It is nothing more than suppressing demand and increasing supply. The key to regulating supply and demand is to change the expectations of market participants.

The demand caused by urbanization, population, and income is natural and healthy, and there is no need to regulate it. The focus of governance is on false demand created by excessive currency. Since it is caused by currency, "the bell still needs to be solved by the bell", the central bank will tighten the money. As soon as the money is collected, not only will there be less loans, but inflation expectations will decline, and residents' incentives to buy a house will be weakened, and demand will be further reduced.

When demand is weak, developers need to consider stopping the market and increasing supply, as prices in 2013 may be lower than in 2012. If the government announces at this time that it will abandon the "1.8 billion mu red line" and increase land supply, the possibility of lower house prices in the future will increase greatly. It can change the price expectations of buyers and sellers, thereby changing the behavior of buyers and sellers today. Residents are no longer anxious to buy, but real estate developers are anxious to develop and sell, and house prices are turning down.

To sum up, the policy of stabilizing house prices is to tighten the money supply and liberalize the land supply. The policy so far is to liberalize the money supply and tighten the land supply.

Real estate is a very important industry that drives the national economy, so the author suggests that the purchase and loan restriction policies be cancelled. Let the real estate industry play a role in stimulating the economy. The purchase and loan restriction policies are neither reasonable nor legal, because it restricts consumers' right to purchase freely, and it also violates the right of enterprises to operate independently. It is time to cancel the illegal and unreasonable policies. Let the real estate industry promote the national economy.

Xu Xiaonian's economic structure

Such a structural structure so far can take effect immediately. For example, the domestic economic structure was originally over-invested. In 2011, more than 9 trillion yuan in bank loans, coupled with financial funds, most of them went into investment to make the economic structure. Imbalances and further deterioration should be taken to stimulate private consumption. Private consumption can have immediate effects, such as tax cuts, such as fiscal wealth, which can be put into social security. Why don't Chinese people consume? Because he was afraid that there would be no protection in the future, it means that our public services are not in place, that our finances are rich, and putting that money into social security, releasing ordinary people's savings can be turned into consumption, and the immediate effect can be effective in the short term. No It is necessary for the government to spend money to stimulate investment. The result of stimulating investment is excess capacity everywhere, and these excess capacity will inevitably be converted into bad debt in the future.

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