@tobararbulu # mmt@tobararbulu
MMT in China https://youtu.be/USR58ZU3HB0?si=2f-TCVMJIQVrPGvt
MMT in China
(https://www.youtube.com/watch?v=USR58ZU3HB0)
Yan Liang, Willamette University
Transkripzioa:
0:03
um so what i’m going to talk about today is really just you know thinking about mmt in china um i will briefly mention
0:09
some recent debates about mmt in china at the very beginning and then i will move on to my own sort of work
0:16
applying the mmt lens to look at china’s development experience and make some policy suggestions so feel free to stop
0:23
me anytime if you have any burning questions or clarifying questions i do have 41 slides but i’m sure i’m not
0:31
gonna zoom through all of them um so feel free to you know let me know um which part you would like for me to
0:36
elaborate and the sound is okay that is my largest biggest volume
0:42
so um all right so this is exactly what i just talked about um start with uh the
0:48
mmt debates and then look at mmt from the um sorry look at china’s growth um from an m t perspective and then made
0:55
some policy suggestions the debates so there have been really lively debates
1:02
about mmt in china at the very height level i’m talking about people like
1:07
the deputy administrator of the state administration of foreign exchanges
1:13
and people like the director of monetary policy department at the central bank
1:18
who was just jailed last month for internal i mean insider trading scandals
1:24
but nonetheless this is just a picture to show that mmt had an inroad right into china’s policymaking and academic
1:31
circle but unfortunately there are a lot of misconceptions of mmt as you can read through some of these quotes um i
1:37
translated them from chinese to into english so um if it doesn’t make sense then it probably doesn’t
1:43
not your fault um so one of the arguments here is that you know mmt is all about quantitative
1:49
easing right it’s all about the central bank purchases the um treasuries
1:55
right and by of doing that they are able to you know inject liquidity they’re able to set the interest rate low so
2:00
they help to boost the so-called solvency of uh sovereign government right and then the second quote here oh
2:06
by the way they also said that m t worsens inequality because inflates asset price that enriches the business
2:12
oligarchs in the united states and then the rising consumer price then impoverished right the average americans
2:19
so that’s the view and the second point here is to say that mmt only applies to china’s past
2:27
where the physical authority is in charge of you know money creation whereas now china like many other
2:34
monetary monitoring system is a central bank that is in sorry take charge of the
2:39
monetary policy so it’s no longer working for china right um send the last
2:44
quote here to say you know mmt is all about monetized deficits right deficit
2:50
spending but china should not do that why we still have very sufficient uh so-called physical space right the
2:56
government gdp government debt to gdp ratio is less than 60 percent about 40 some percent um
3:02
and china’s inflationary pressure is very low um but you know we need to watch out right for that inflation um
3:09
that is exported right by countries like the united states and european unions right um and we also don’t want to do
3:15
that because that’s going to undermine the so-called central banking independence which is a hard earned um
3:22
sort of reality since 1995 the government of banking reform so we should now go back to the old road okay
3:28
so these are some arguments on the other hand there are some excellent insights from the chinese
3:35
scholars and policy advisors so the first one here is a very high
3:40
level economics scholar and also former policy advisor to both the central bank and also to the
3:47
ministry of foreign affairs who said it is a misunderstanding that mmt is advocating for endless government
3:54
spending right that is a misinterpretation of um mmt
3:59
and then some people would also said you know it’s really we need to pay more attention to the scale
4:05
and types of deficit spending right i thought that was right on right that it’s a that’s a good idea right
4:11
mnt supports blending on public works infrastructure social social safety net with the process of creating jobs and
4:17
all the other wonderful stuff so definitely spending is self-containing right um the third point here is to say you
4:23
know the whole idea of central banking independence is a false proposition right that the treasury and the monetary
4:30
authorities have to coordinate right so i thought that was also an excellent idea um
4:36
then the following uh these two scholars uh jagong liang and jose
4:42
they have published quite a few of you know scholarly work on mmt
4:47
so they address many of the questions that i think again still confuse a lot of the chinese mmt scholars
4:53
so here they talked about how mt is not about monetizing deficit it’s not about giving up the independence of central
4:58
bank and what not it’s not about limitless um government spending and meant to address very important
5:04
questions like you know there’s no such thing as crowding our effect by driving up interest rates by way of you know
5:10
government deficit spending and there’s no um such a thing as you know government spending would necessarily
5:15
create inflation right any form of spending could prove can um inflate but
5:21
you know we just you know need to make sure that we not only just you know increase government spending when the
5:27
economy doesn’t need it right and we also need to increase government spending by creating i think fadal and other people have talked about earlier
5:33
right that strategic supplies of some essential um you know needs right for the economy
5:39
um and the last quote here talked about how uh the minister of finance which is the
5:45
treasury counterpart right in china and the pboc the people’s banks of china
5:50
they will have to coordinate so then they can increase efficiency and capacity of macroeconomic governance so
5:55
there’s some excellent insights um so to set the record straight um i don’t think i need to go through this very much
6:01
because i think after whole one day and a half is immersion right into mmt right i think you already kind
6:08
of understand uh many of this stuff right so mmt describes how physical monetary operations work for a monetary
6:14
solving government mnt is not about qes not about monetizing deficit
6:20
because as stephanie puts it very elegantly right it’s not it’s not tax right it’s not you know tax
6:27
bond sales before you spend it’s actually staff right you spend first um you take them and sell bonds for other
6:33
reasons um so i think what is important to understand here is that really what is the purpose
6:39
of government spending and tax right it’s to mobilize resources to advance public good and however that public good
6:46
is defined and democratically accountable right and finally for developing countries like like china i
6:52
think mnt provides not only uh some of the demand side suggestions in terms of how we can manage demand but more
6:58
importantly um some of the structural transformation right some of the the so-called supply side right um i think
7:04
policy suggestions okay so i would start then um i mean i will i will put that debate
7:10
aside uh now just to go through some of my own sort of work on how to apply the
7:16
mmt lens and i want to start by talking about preserving monetary sovereignty right so i think as we heard from the
7:23
previous panel in the developing world many countries are not able to do so they’re not able to have that full
7:29
monetary sovereignty because of again very um there is a historical legacy right
7:35
there’s a colonization there was a lot of legacy comes from that you know history but then they’re also very
7:42
misled mishated you know policies right so in this case i would say you know
7:47
china is doing relatively a good job in preserving that monetary sovereignty for one is china has adopted you know
7:54
capital control since the 90s right when they opened up the so-called current account they have remained really
8:00
effective control on the capital account even though that started to recently change right back i think it’s last year
8:07
sorry which was on 22. 2020 right the government started to gradually open up more and more the
8:13
capital account but nonetheless from the data as you can see here um the fdi inflows is a lot more than the portfolio
8:20
inflows right so these are relatively long term they’re relatively greenfield they’re relatively resilient and stable and
8:28
provide some sort of benefits right and they try to keep the portfolio investment
8:33
at bay china also accumulated a lot of the foreign exchange reserves and again
8:39
there are different debates about what’s the motivation behind right it is a mechanicalism policy or is it china
8:45
trying to safeguard its financial order right but in any case um china does accumulate
8:50
a lot of exchange reserves over time so if you go by the traditional benchmark
8:56
right you wanted to have reserves that are three months worth of your exports china has five times more than that okay
9:02
so that exchange reserves helped to preserve um sort of the the monetary sovereignty and stabilized financial
9:08
order um this is just to show that china does not have much external debt um so
9:14
right now it’s looking at about 15 percent the following debt to gdp ratio and again if you
9:19
um you know sort of looked at world bank for example their debt sustainability framework they said for medium countries
9:26
capacity to be able to handle that you know we want that share to be less than 40 50 right so china is much less than that um
9:32
in terms of debt service to export ratio we’re looking at about nine percent which is again much lower than the world
9:38
bank center of about 15 right um and finally um
9:44
china used to have very much sort of packed exchange rate as you see from 1994 when china started to have the
9:51
exchange rate reform um they devalued the currency from about 5.2
9:56
yen to one dollar to 8.27 sorry 8.7 uh um per dollar and then they
10:03
maintained that pack for a relatively long period of time from 1994 to 2005. but since then they started to flag both
10:10
flexibilize right to reform um to reduce the pack but use a basket for currency
10:16
but they also increase the band within which the r b is allowed to fluctuate right so some flexible sort of exchange
10:22
rate arrangements again help to preserve uh that currency um sort of the the monetary sovereignty so um
10:29
if there’s any question i’m happy to go back to this but i think some other folks have already talked about this concept of monetary
10:35
sovereignty right so we don’t want it to have you know fixed exchange rate and
10:40
free capital mobility um and with those two then we’re not going to be able to have the autonomous monetary policy
10:47
making right the well-known so the impossible trinity or the trilama right but i think after you learn about mt you
10:54
also understand that fiscal capacity will be also lost right if you have um
10:59
you know open capital uh accounts but then with fixed exchange rates so it’s really a dilemma that
11:04
we’re talking about right the four things cannot happen all at once okay so um
11:11
so once we kind of help to preserve the monetary sovereignty right so we can apply some of the mmt informed policies
11:17
we can in some way sort of practice right what the mmt would um subscribe then how china was
11:24
able to harness the public money right to advance this development interest right how china was able to use public
11:32
public money to provide development finance right so just a little bit theoretical
11:38
stuff um jan craigo who i think some of you are familiar with um his work right he talked about
11:45
the so-called two obstacles obstacles to development so there is obstacle of the financing constraint but there’s also
11:52
the real resources constrained right so the mainstream
11:57
analysis and recommendation is that you know developing countries are
12:02
financially constrained the income is too low they spend too much on consumption they don’t have
12:07
enough savings and they don’t have foreign exchange to purchase the imports
12:13
right so the so-called two-saving gap so how do we do that well we need to force
12:18
people to save right through financial repression for example keep the interest industry very low so
12:23
people don’t save i’m sorry keep the interest rate high so people will save more right
12:29
or we have to use policies to attract foreign capital inflows so the sole aim
12:34
of development policy is reduced to how we accommodate right to court the
12:40
foreign investors to bring the foreign savings into the country to finance our development right
12:46
but the problem here is as you are well aware of right as i think the previous
12:51
panel has very eloquently uh explained right attracting and also relying on external
12:58
financing is in fact is infeasible on two grounds one is that there is simply
13:03
no net financial resource transfer from the rich to the poor is the reverse
13:09
um i think fadal mentioned something around along the lines of two trillion dollars annually right the financial resources
13:16
go from the developing countries to the developed countries so this one uh chart
13:21
is from the uh united nations so what it shows is that between 2000
13:26
and 2017 every year on average there are about 500 billion dollars of net
13:32
resources transfer from the developing world to the developed world and the most recent data it’s even more
13:38
disastrous right developing countries in total on 11 trillion dollars external
13:43
debt and 3.9 trillion dollars debt services are due
13:49
by 2020 and average government debt payment account for
13:54
about 14 of their revenue so thinking about you know the cova racked harvard
14:00
economy where there’s so much needs for government spending and yet the government is sending away 14 of the
14:07
revenue um to the foreign creditors or investors right
14:12
so in other words if you wanted to attract foreign capital
14:17
um it’s a mirage you can’t do it right as the developing countries as a whole well
14:22
but then you might say maybe china is able to do that or maybe brazil is able to do that right or maybe whatever country that is able to do that right
14:29
but the point though is going back to what craig was arguing this idea if that we can continue to
14:36
attract new flows would mean we have to keep borrowing new loans
14:42
to pay back the debt services on their own loans right that’s the only way you get the net inflows and so that is what
14:51
ponzi thank you very much right very good um so those are the two reasons why we do
14:58
not want to rely on um foreign savings right um
15:04
and in addition i think mmt provides great insights on this as you know some of you uh well all of you have listened
15:10
to randy’s earlier speak speech right so we talked about how mmt is a confluence of different heterodox
15:17
approaches right so one of the things i think is important to understand is the distinction between credit and saving
15:23
right financing and funding they’re different right saving comes at the end saving is
15:28
a byproduct of income growth right we have to have credit and financing to kick off production
15:36
production creates income income gets saved that’s where that’s where the savings come from you can’t put the card
15:42
ahead of the horse right so we need financing we need credit and saving will come right
15:49
and credit can be created at two levels at the state level and also at the
15:54
banking level right the state spends money into assistance
15:59
and the private sector borrows money into existence and the state always makes sure these two levels of credits
16:06
are traded apart and so development financing needs to be and it has always
16:11
been primary domestic okay so in specifically china’s case there are
16:18
three practices i think it’s worth noting and of course there are much much more
16:23
the first thing is to establish development policy banks and also state-owned state-controlled
16:30
state-influenced commercial banks so what do they do well the state-owned
16:36
amendment banks are instrumental in the long-term development planning and also infrastructure building
16:43
right um they also provide you know the sharing of cost of discovery of new
16:50
technologies and productive processes um they also finance the projects that
16:55
are with the current you know non-economically viable but long-term beneficial both economically and
17:02
socially the kinds of projects right so in china for example the development
17:07
bank was established in 1994 and it’s actually involved in a five-year plan
17:13
it has contributed to regional planning industrial planning and many many of the mega projects in china
17:20
um i don’t know how many of you had a chance to visit china i myself haven’t been back since the pandemic i mean
17:26
actually even before that 2018 but if you get the chance to travel right in china
17:32
i would strongly recommend you to visit some of the sites like the three gulch dam
17:37
right i think that’s really human wonder right one of the biggest hydraulic projects right hydra power project in
17:43
china also the shanghai pudong international airport right so a lot of these large-scale projects
17:51
that take years to come into fruition not going to generate any net present value in the short term these are the
17:57
projects where the development bank have been taking part of right and and leading in
18:02
the construction of these mega projects um the ceo banks also they account for
18:08
about 45 percent of the total assets right now and all of these banks are able to
18:13
generate a lot of finance for investment right as many of
18:18
you have heard about that china’s investment drive driven economy uh to some degree yes that is the case right
18:25
so the the very bright yellow column um is how much the investment growth
18:33
contributes to real gdp growth okay so the last data that i um sent
18:39
there is um the investment growth contributes to 1.11 percentage points um to gdp growth
18:47
so this is from the supply sort of the factor production side right so capital
18:54
as you see that blue column is the contribution of that capital to gdp growth over the
19:01
years again very significant contribution and some people would argue well china’s is growing really by improving the
19:08
productivity the so-called tfp the total factor productivity well be the sma
19:14
without the kinds of investment right without building without manufacturing without without you know fabricating how
19:20
you’re going to be able to prove improve your productivity right so i think those two go hand in
19:25
hand um a lot of investments are done not only by the private sector but also by the public
19:32
sector um this data ends in 2015 this is an imf data sets i wish i could have more but
19:39
as any of you who work with you know chinese economy you understand how difficult it is to get the data from the official government’s side so i look
19:47
forward to kind of you know looking more deeply and see if we can get more data to the more recent years uh simply
19:53
because there’s this argument about state advancing private sector retreating so i really wanted to see
19:58
that in data if the government is you know encroaching on right sort of the investment projects that sort of belong
20:04
to the private sector and i will get back to that point later here is the sectoral
20:12
division of the investments real estate infrastructure and secondary
20:17
industry take up the most of these investments so there might be some
20:22
i think argument uh which i think makes some sense that we wanted to in a way
20:28
diversify away from real estate sector um so again we can talk about what is
20:33
the way to do that right um so this goes to the recent sort of
20:39
arguments that you know chinese the government is investing too much right so as a result the efficiency of
20:47
capital formation is declining so that shows on the left chart left-hand panel
20:52
um that we see that you need more and more capital to produce every one dollar
20:57
of gdp right the so-called incremental capital output ratio has been increasing
21:03
and as a result of that that has been
21:09
increasing right because if investment becomes less less efficient that means
21:14
we’re generating less and less profits which means we’re less and less able to pay back
21:20
right that investment financing so as a result we see the accumulation of debt by the non-financial corporations um and
21:28
also some government and household that right so this is the argument that we need to somehow tie the hands of the
21:34
government we need to reduce investment we need to rebalance the chinese economy right
21:40
um now i have something to say about that right but let’s um maybe move on to the next point then i will talk about
21:46
the policy implications um here’s the second point um how do we utilize how do we harness public money
21:54
well i think china is really trying to use you know the state created sort of
21:59
money and financing to support its industrial undertaking industrial upgrading right
22:04
so here is um the industrial policy spending which was oh sorry oh i did have the the
22:11
source there is the center first security and uh i can’t remember exactly all the
22:17
acronym but anyway so it’s the most recent sort of publication that look at how much china spends on industrial
22:23
investment right in that uh policy spending so um if you look at the second column
22:29
from your left china spends about 1.47
22:36
is it eight thank you 1.48 of the gdp on industrial policy so there’s a
22:43
decomposition of what these you know um types of spending is right it largely drops all the other
22:50
countries as you see from this chart okay so
22:55
this is a way for you know again improving the industrial capacity help
23:01
to generate more high-end manufacturing right the so-called smart intelligent manufacturing
23:06
it doesn’t just come naturally right as you see the government spending the government incentives are right
23:11
behind these kinds of technological innovation and industrial upgrading
23:17
in addition to that direct spending from the ministry of finance the government has also invested heavily in the
23:23
so-called government guided funds um some puts the number at 1600 others say
23:30
there are 1800 of these government-guided funds in china right now and it has about 1.45 trillion
23:36
dollars worth of investment um and these are mostly go to the national strategic emerging industries
23:44
that the chinese government identified around 10 of them so one of the example is as you
23:50
understand the semiconductor ships race right that china is investing heavily in
23:55
the so-called national integrated circuit investment funds where the ministry of finance contributed 36
24:01
percent of the capital and now they have about 200 billion dollars worth of investment and mostly in the
24:06
semiconductor companies and they also acquire most recently a large semiconductor from in singapore okay so
24:14
this is the way again government trying to provide the financing to promote technological innovations and industrial
24:21
upgrading okay there are also some numbers here about the government spending on energies r d
24:28
again china and the united states two countries helped to lead the way um the global r d spending by government on
24:35
energy has increased by about five percent over new over over sorry year over year um and these two
24:42
countries are again leading the effort and then the right hand side here is the government spending on the new energy
24:49
vehicles right so all of these you know again are very important for china’s technological catching up um there are
24:56
some the uh the u.s scholars have lamented on you know the chinese now they’re selling
25:02
four times more evs um they’re producing 17 more times of solar panels there’s
25:08
they’re making eight times more semiconductor sorry computers and and
25:13
and electronics right so again i think we need to kind of understand um how china is able to do that
25:19
right and i think there is a very critical role uh by the government by the state money right in addition to
25:25
some policies of course finally the last point that i just wanted to
25:32
mention here is that just by the regular fiscal spending out of the general government budgets they are very hopeful
25:40
for the economy as well because as you understand some of the mainstream argument right
25:46
the chinese are doing well because they have high savings right the chinese are very thrift they save bunch so they’re
25:52
able to finance the investment right but the question is how do we generate this private surplus
25:58
right how do we enable the households and and the enterprises to save
26:03
well from a macro level the sexual balance approach it’s important to note here
26:09
the left hand side here shows the bad central balance of china so if you look at the last year that i have the numbers
26:15
there the private sector surplus is the mirror effect of the combination of the
26:20
external surplus and the public sector deficit right so is the government deficit spend
26:27
is the government deficit and external surplus which um not a whole lot but it’s positive
26:34
right it’s around one point i can’t read the number myself 1.674 percent of gdp right so is these two
26:41
allow the private sector to save right so the right-hand side here shows um the
26:46
blue line is the household saving and the green line is the enterprises saving so again is the government
26:53
spending that allow the private sector to save it’s not just a household thriftedness
26:58
right or some sort of financial repression policies or some kinds of other exploitative
27:04
measures so this just to show the government spending
27:10
the revenues and also the expenditures and as you probably already heard earlier right
27:16
a lot of these government expenditures and spending are
27:21
a result of the automatic stabilizer right some of these are not really discretionary when the economy is not doing well for example 2020 when china
27:29
was hard hit by the coronal virus the spending increased by a lot the
27:34
revenues dropped so that leads to a large government deficit and that helped to again stabilize the economy
27:42
okay so that gets us to the last point that i want to make about mmt informed policies right
27:48
um as you probably have heard of the the there’s all these lofty goals right by
27:54
the xi jinping demonstration um the idea is that from 2020 to 2035 we
28:00
wanted to double the size of the chinese gdp okay which means we have to increase the
28:06
gdp growth by about five percent every year to get there okay so how do we go about doing that um
28:14
start with made in china 2025 initiative right which is not very much talked about these days in
28:20
china anymore right because of the pushback from the united states and other you know advanced countries
28:26
but still a lot of efforts are going right as i show earlier about the government’s efforts initiatives to
28:32
boost investments in technological innovations and industrial upgrading so that is due
28:37
um for you know for xi jinping administration this is one of the driving force right we wanted to up our
28:44
productivity our innovations um to be able to both self-reliant um and also to
28:49
be able to grow continuously right the second point is the so-called common prosperity campaign which is the idea
28:55
that you know we have surpassed the stage where we simply want to have high growth now we
29:01
wanted to have shared growth shared prosperity right now many commentators say this is something that is louder in
29:07
words and lasting actions but nonetheless i think um there are some
29:13
policy actions and um sort of uh initiatives right things like regulated
29:18
hailing industries allow the workers to have better working conditions and and fair pay
29:25
and things like you know crack down the real estate sector trying to curb the rising you know housing prices and so
29:31
and so forth okay uh last point about regulatory scrutiny this is antitrust uh regulations
29:38
especially in the tech sector and also the data protection
29:43
and we can get to some of these if you are interested yes
29:52
unfamiliar with that i was curious if you could just provide some perspective in terms of
29:57
how that falls in yeah i’m absolutely familiar with that because i’m after math right of those
30:03
after school tutorial programs no i’m just kidding um so what happened is the
30:08
government believed that if we want to have a more sort of harmonious society
30:13
if we want people to be happier we should stop a cutthroat race in the
30:19
educational system so this idea these private tutor programs um you know first of all it’s
30:26
very unequal in terms of who gets the access to them and second it does present tremendous pressures um on
30:34
parents right they always wanted to send their kids to after school programs um in the old days you know
30:40
i mean you guys are from all different countries you probably know the us system is so different right kids get out of school at three they play soccer
30:47
and what’s homework right um so there’s this argument that we wanted to curb that so
30:53
then um the parents are not too pressured to spend too much money on education and spend too much
30:59
sort of work on this right and increase the anxiety level so this is one of the things to crack down on these for-profit
31:06
tutorial programs um but of course um a lot of debates a
31:12
lot of critiques about that right because this is a sector that employs a lot of people and it’s a huge sector um
31:18
it results of hundreds of people hundreds of thousands of job losses right and some of the market value of
31:24
some of the listing companies that um that do these kinds of things you know they saw their their their stock
31:30
value evaporated overnight by like 80 percent um so but any case i think this is one
31:36
of the so-called common prosperity campaign is to ease the anxiety level of society
31:42
in china they call it three mountains healthcare education and elderly care
31:47
sorry a housing housing price right those are the three burdens on people so
31:52
this is one of the initiatives to reduce the educational expenses yeah
31:59
okay all right so i’m getting there um and feel free to ask more questions this is wonderful
32:05
um so what i think oh sorry i think i need to go back to quickly here
32:10
so the reason slow down um you know the chinese economy has grown at an average
32:16
about you know double digits growth right um before say 2015 right and in
32:22
most years we have seen slow down in economy average about five six percent right the most recent target the xi
32:28
jinping station set up is 5.5 so there is this idea that you know china is slowing down we’re not growing
32:34
at 9 10 anymore we’re growing in five percent six percent or even three percent or two percent right when the
32:41
economy was hit by the chronovirus that that year china’s growth rate is 2.2 but again still envious by the rest of the
32:46
world um but the problem here is you know the diagnosis is well the chinese people are
32:52
getting old before they get rich right so this population dividend is dissipating okay so what do we do about
32:58
that um there’s the imbalances that we mentioned earlier too much investment not enough consumption so we need to
33:05
reduce investment right however we can do that there’s a withering uh reform some of the argument is that you know
33:12
the state is taking over the private sector so that is why it’s slowing down there’s slow down in the
33:19
urbanization efforts there’s also more inward-looking orientation right in the name of dual circulation
33:26
um there’s also the argument that well that’s because china is managing its growth in a more sustainable way right
33:32
we want to decrease energy intensity we want to transition out of the carbon you
33:38
know intensive economy so all of these could sort of um you know
33:44
keep a break right on the on the economy um there are other reasons inequality
33:50
social instability and also geopolitical tensions what have you so
33:56
yes these difficulties are real right some are more important than others some are more
34:01
um i would say grounded right are more substantiated by others
34:07
but through a mentee’s perspective right what can we do right so some of the
34:13
i would say what i would propose is in the short run to shore up the economy um that it’s very much red covered by
34:19
the coronavirus and the strict lockdown right which in some ways i think you know it’s a choice of some of the
34:25
sort of chinese people right um we’re trying to minimize the death right there’s a lot of still elderly are
34:31
not vaccinated it’s also very populous country very uneven distribution of healthcare facilities so there might be
34:38
reasons for the government to have those straight lockdowns but the point is we have to help the people to maintain
34:43
their livelihood right at the same time saving their lives so i would advocate for cash transfers cash handouts for um
34:50
the population i know randy would say well we want job guarantee right it’s much better than cash transfer i get
34:56
that but with a very strict lockdown it’s impossible for people to go to work right or the chinese have the so-called
35:03
closed loop system 20 000 financial professionals they live in their office right so there are some of that some
35:09
people can still work and they still are going to go to work but i do think that we need to help people to pay rent right
35:15
to pay utility and so on and so forth so i do believe some cash handouts are necessary subsidizing payrolls
35:22
especially for small and medium-sized enterprises not only keep the jobs and income
35:27
but you know really help the supply side of the economy as well right so that reduced some of the inflationary pressure
35:33
infrastructure spending um some people say china invests too much infrastructure well in recent years we actually see slow
35:39
down in infrastructure spending which is that big bold um
35:46
great line that says infrastructure so as you can see since 2017
35:51
we have seen a decline in infrastructure spending so now the government is planning on 2.3
35:57
trillion dollars of investment in one year um to update right and the u.s number is definitely dropped by that um
36:06
so i’ve i’ve showed you many many of graphs right so i feel like now i earn my or my
36:13
rights to show some just like pictures um the left one
36:19
is the solar panels right it’s in shanxi province um and the right i think i just spread out from twitter
36:26
so um just to show the high speed railway you know how it mushroomed right from 2008
36:33
to 2020. so i do think that infrastructures investment is still very helpful uh
36:40
you know not to mention the construction works and so on and so forth are less you know subject to virus and so on
36:47
but yes we wanted to build more digital infrastructure more social housing and new energies right and also i would
36:55
argue that the central government need to beef up the transfers to the local uh
37:00
governments so remember earlier i showed you that bill that buildup right so for one i think
37:07
again the central government needs to increase their spending so then it would help the private sector to not to take
37:12
too much debt right if the government spending helps to increase the gross profits and allow people to generate
37:17
income and savings that would help to reduce the debt burden not the not the other way around because government debt is not born the same as a private debt
37:25
right um so here’s just some charts that shows the distribution between the central government’s debt to gdp and
37:32
the local government’s debt to gdp so the local government are much more financially constrained so
37:38
the central government needs to increase the transfers they are planning for 1.5 trillion dollars which is 18 increase
37:45
than last year but i think that still needs to be increased um because well
37:51
i can share some of the anecdotals but let’s just move on to the last point here the long-term measures i would say
37:59
increase the social spending china’s social spending is relatively low compared to the oecd standards education
38:06
as one example china invests about 4.1 percent of the gdp in education which is
38:11
oops sorry wrong way so 4.14 of gdp
38:19
um to education uh this is actually 2017 number and
38:24
compared to other countries um you know it’s still low um i think japan and russia spent less
38:32
probably largely because they already have so much of uh college you know degree
38:37
holders in in their population um
38:43
so yes i think that social spending would be very helpful um especially when you think about the so-called
38:49
dissipating or missing you know population dividends you wanted to improve that you know
38:54
skills and and productivities and so on and so forth um
39:00
okay so i’ll just make one last point did somebody
39:06
uh remind me that i’m over time
39:12
oh okay um sorry so the second point here um i would again uh just as example
39:19
i think tax reform to help with redistribution is important um i think maybe some have already
39:26
mentioned right from mmt’s perspective tax is not about financing government spending right but tech serves many
39:32
other purposes right keep your currency valuable and acceptable redistribute right and to incentivize
39:40
and disincentivize certain behaviors and actions and all of these i think are important so in chinese case
39:49
the tax revenues of the government relies mostly from the value-added tax very little on income tax
39:56
and as a result the tax system is not very progressive right so when you look at
40:02
that blue column which is the gini coefficient before the transfer and tax programs and then the little triangle
40:09
there is after uh actually the reverse sorry the triangle is the market income uh uh
40:18
the gini coefficient based on that and then the lot the the column here the red one is after all these tags and spending
40:26
programs by the government how the genie coefficient looks like right so again it barely changed so that
40:32
just goes on to show that the text system is not very progressive in redistributing and that is one of the
40:38
arguments that many scholars were saying if xi jinping is real about common prosperity we ought to reform the the
40:46
tax system right um so other things would i think pretty
40:51
straightforward that we want to continue to um you know finance for the sustainable
40:56
urbanization meaning we have to build infrastructure to be able to allow you know
41:01
uh hundreds of millions of uh people to move from the rural sector to the urban sector
41:07
we also need to continue to invest in green energy for that transition okay
41:12
all right so i’m going to stop here and feel free if you have any questions comments or
41:19
gentle critiques yes
41:37
one of the things he said was that um for like sorry the savings
41:43
of households essentially allowed um high investment demand and also uh
41:51
current account um surpluses with the rest of the world without causing internal overheating for
41:57
the chinese economy and i know stiglitz has argued right the same for other countries so
42:05
is that kind of like fair to say that indirectly perhaps
42:10
um borrowing is funding investment in at least in the way that
42:16
is offsetting um unsustainable increases in demand
42:22
um so what helped to sustain the unsustainable demand you said that is it
42:30
exports well what if they’ve got high exports so lots of money yeah and also higher investment yeah so
42:38
that is also increasing demand um the fact households are saving a lot of
42:44
private sector saving a lot he seems to her seems to argue that that
42:52
stopped the economy overheating in a kind of you know kind of indicating that you do need to
43:00
offset with policies like that in certain examples
43:06
yeah so i i think in some sense the again the
43:11
savings is a result of the high investment growth and also the
43:16
willingness of the rest of worlds especially the united states um to net import from china right so in a
43:24
sense it’s it’s not that because we have too much saving therefore we have more investment and therefore we’re able to net exports
43:32
right i think it’s a reverse right is that high investment and
43:37
high net exports that allow the private sector to generate savings
43:50
right rather than right the money that’s coming from investment
43:56
or right right so well i think there is a distinction
44:03
between investment growth i mean consumption growth which is growing right people do
44:08
consume more because they have a higher income but then still have more left to save
44:14
but when you talk about the consumption share of gdp it is relatively small and
44:19
it has gone up for a while um since the sort of the imbalances where the premium
44:25
and when jabal talked about this in the late 2000s and so there were some efforts to rebalance the economy um
44:32
especially after the so-called the crackdown on the show called shadow banking system to reduce informal
44:38
financing that drive up too much you know unproductive investment we do see
44:43
some rebalance where consumption shares start to rise but then the argument here is you know
44:49
because of um the covet right now we’re seeing the government again ramp up investment so
44:55
we could see another reversal of investment share being too high but i think again there’s a difference
45:02
between when you think about what you mean by sort of overheating right so i think if the if the consumers are
45:08
consuming more right when you have this healthy supply of products i don’t think
45:14
that would create overheating in the sense of you know commodity or just general price inflation
45:20
but when it comes to you know some sectors for example housing sector
45:26
yes a lot of the household wealth is being invested in the housing market
45:31
a lot of the real estate developers were able to borrow a lot to invest in real estate so
45:38
that does drive up prices especially in you know big cities like beijing and shanghai so that’s what prompted the
45:44
chinese government to stipulate the so-called three lines back in 2020 the
45:50
idea that we want to bring in those real estate developers excessive borrowing excessive
45:58
you know property market developments and so you know some of you must have heard about the evergrant um you know
46:05
problem right crises um so that is you know i think if you mean overheating where some of the
46:12
property market right some of the asset market is being sort of inflated i would say would you see some of that in the
46:19
housing housing market historical
46:26
case study from other development where you are increasing huge amounts of investment in soviet
46:32
union where you’re making huge capital investments yes but you don’t yet have
46:37
the supply to feed everyone so in in some regards increasing
46:44
or encouraging households to delay consumption through increasing the savings rate
46:52
can be a helpful thing i think that’s
47:01
um
47:12
right um so yes i mean even from a historical perspective i’m
47:17
not sure to what extent that argument is is true i mean to in some ways again this idea of force saving somehow
47:24
mid-house cut their consumption so then they can save more i mean again what we have seen in china the national saving
47:30
is not just coming from the household sector um so household sector may well save more i mean in terms of the sort of
47:36
marginal can to save um you know because maybe they’re more thrift or maybe they
47:41
just worried about you know um the precautionary savings right they’re worried about not have the money to
47:47
thank you to score or you know for the elderly so they save more but i think the most important reason for china to
47:52
be able to generate larger savings because that high income growth so even if you’re not a very
47:58
thirty person right when your income grows so much you simply have more to consume and yes you have more to
48:04
save to to save um so i don’t necessarily buy this argument about the way to somehow force the the households
48:11
to save either by way of you know um the so-called financial repression keep the interest rate low so then sorry keep the
48:17
interest rate high keep saying low keep the industry too high so then households try to save more and and spend less
48:23
yeah um am i the monitor moderator just okay
48:29
patricia go for it you mentioned capsule controls yes very often in relation to china people
48:35
interpret that as just you know manipulating exchange rates what other capital controls that china
48:42
use yeah so the most important ones are again to distinguish you know the the
48:49
foreign investment and the portfolio investment so for a long time i think at least before 2020 so all the way from
48:55
1994 to 2020. so the foreign event direct investment in china they’re also
49:00
having a higher standard to be qualified as foreign investment in the first place for example the oe standard oecd sender
49:07
is you have to invest 10 percent of the the equity right so but china they
49:13
have a higher standard i believe it’s 20 so and then they have very sort of
49:18
strict uh regulation system um duration requirements sectoral development uh sectoral um regulations so there are all
49:26
these you know uh prohibited lists that they don’t want for investors to go in right
49:33
so there are a lot of these sort of regulations in terms of what the foreign investors can come in and invest in
49:40
so for acquiring just stocks and bonds they have to go through many different hoops right they have to for example
49:46
have through some of the so-called connection um that the government set up some sort of connectors in hong kong so
49:53
then they would foreign investors will have to invest in china stock market by way of going through hong kong stock
49:59
exchanges and so and so forth so there are many different um uh sort of
50:05
i would say regulations right to distinguish foreign investment from the rest and foreign investment is it’s
50:11
welcomed but still under very you know uh stringent scrutiny
50:20
yes yes there are also quantitative controls in terms of for example the foreign
50:26
investors are not allowed to own certain percentage of equity but not a general
50:31
control in terms of how much dollar amount you can invest in china yeah
50:36
yeah so as late as you know 2016 that’s the last year number nine was looking at that the
50:42
foreign holding of chinese banking assets less than two percent so that just goes to show you know how
50:48
important that kind of financial regulation is someone mentioned earlier uh coupled with the kind of um capital
50:54
account control yeah yes you’ve been very patient sorry what
51:01
oh okay i’m so sorry i know i’m always taking too much time than i should but go ahead
51:07
you would judge please role of m p based policy in
51:12
the sense of building geopolitical resilience against embargoes potential embargoes
51:19
of foreign nations because just right now the white administration emphasized
51:25
that if china were to supply weapons to russia they would also be sanctioned and i
51:30
developed a feeling that china is its unique position is able to
51:39
build some resilience by adopting mmt through the base policy
51:44
right so i would say maybe two things on that one is i would echo what fadal and
51:49
other colleagues have talked about earlier so i think that resiliency really means that you have to have your
51:55
foot security you have to have your energy security you have to have your um
52:00
you know tech right tech independence so i think all of these um you know in some ways china are doing that
52:07
um and they have been pretty smart in doing some of the small things one example is you know right now the
52:12
chinese you know if you follow the inflation rate right now uh this month’s data is about 2.3 percent uh one of the
52:18
things is they have built up some of the sort of stockpiles of grain for example in the past two years so that really
52:24
helped reduce the prices of grain and rice and pork they have strategic you know stockpile of pork right because
52:31
that’s the meat chinese consume so i would say yes i would agree those three things are very important to build
52:38
resilience and in terms of the very specific sort of
52:44
you know policies right now i think xi jinping has there are some anecdotes right that xi jinping has you know
52:50
asked people about like you know what can we do to help russia but not you know really do it in face of
52:55
the the nato or the us for that matter but i don’t think china is going to really um i mean had a huge
53:02
have a huge role to play because i think there is a lot more other considerations um as to
53:08
you know china’s political and you know economic priorities than simply you know helping russia right and then the second
53:14
thing i think many people were arguing about um if china wants to build a
53:19
payroll system like swift right which in some ways would reduce china’s reliance on dollar and dollar reserves
53:27
um it is a very tricky question the chinese high level sort of policy making people already worried about it right
53:34
apparently they had a conference where um there was a question about you know how do we diversify out of the two
53:40
plus trillion dollars of dollar reserves and it was silent right no one knows exactly
53:45
how to do that so china has been developing the sips right the the in the
53:50
banking sort of cooling system within china but it’s um scale it really
53:57
sort of it’s paled by you know the swift system so at this point again i don’t really see how
54:03
in terms of that international currency status i don’t think that china is making much headway
54:10
the r b was a much more important vehicle currency back in 2013 and then that sort
54:17
of share of international transactions by r b has actually declined since very noticeably i think since
54:23
2015. um so in terms of you know how to build china up for that resilience i do think
54:30
that the three things right food energy and tech is important and china is doing with some success on that but then for
54:37
in terms of challenging the international monetary system unfortunately i think you know china still has long way to go um even
54:43
people like ray dalio would say oh you know now it’s the chinese world right the chinese union is going to somehow
54:51
rise to to challenge the us dollars but i’m i think we’re yet to see that happening
54:57
yeah all right thank you very very much all right thank you
oooooo
Gehigarriak:
Yan Liang: Txina, merkataritza eta sistemaren erreforma
From the River to the Sea: Ibaitik Itsasora (134) gehi Txina eta MTM
Duda:
Ikasiko ote dute MTM inoiz euskaldunek?
Dudatan nago!
Dena den, eta badaezpada ere, hona hemen hasiera bat:
Gure Kanala: Joseba Tobar Arbulu. Krisia Euskal Herritik – YouTube
Warren Mosler: Zerga-betebeharrak (Tax Liabilities)
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