CITIC Securities: Reduce economic growth and reduce external dependence

-Yang Hui's, executive general manager of Citic Securities bond sales and trading department as a result of the recovery process, countries have been from the early days of the crisis unification into the "Warring States Period": Europe focused on reducing the deficit; the US is trying to restart quantitative easing to spur the economy. This means that inflation may still be a potentially significant risk in the medium term.　　In this process, we face both internal and external challenges: internal, economic growth fell back; In this case, our response is roughly: to reduce the economic growth rate to alleviate the potential devaluation of the dollar caused by the inflation risk, in order to speed up the exchange reserves of physical conversion, income distribution adjustment and the internationalization of the renminbi and other measures to deal with the dollar trap; structural adjustment in particular to accelerate the development of strategic　　To meet the bigger challenges of the future. Specifically, in response to this dilemma, our proposal is: first, to slow down the pace of economic growth. Under the current conditions, reducing economic growth has the following advantages: first, to ease the economic increase and domestic ecological environment fragile, resource constraints and other factors, the second is to improve the terms of trade, improve the real wealth. As Prof Song Guoqing put it: "If China presses its growth rate downward and controls GDP growth at 7% per cent not 12%, resource prices will fall and national income growth may rise to 12% per cent." Therefore, for a significant marginal economy, it is not easy to say that the economic growth rate is good or low, and need some kind of monopoly analysis ideas to explore. At this point, although the statistical significance of economic growth may slow, but from the real income point of view, the real welfare level is rising. Third, in the current international situation, the initiative to reduce economic growth, especially to reduce exports, to avoid the formation of new large-scale foreign exchange reserves, while speeding up structural adjustment, cultivate long-term growth capacity, such a change can often put themselves in a relatively favorable position.　　Four is based on the above discussion, in the future, the US could shift the crisis by creating inflation, and the transmission of monetary to inflation requires changes in real demand, which is an important component of the carrier, so reducing growth and reducing reliance on international markets can also help reduce the risk of serious future inflation. Therefore, we should actively adjust the economic growth rate. In the process, we can adjust the industrial structure, implement the income distribution reform and other structural policies to resolve the negative impact of the economic downturn.　　Therefore, the current is not a period of relaxation policy, the early tightening policy, especially for real estate adjustment policy still need to persist for a long time, not because of fear of economic growth and unworthy, the current most important task is to gradually restructure, especially to cultivate pillar industries. Second, accelerate structural adjustment, cultivate new pillar industry, especially to cultivate the pillar industry with competitive and long-term strategic significance. This financial crisis not only exposes the original economic growth mechanism and industrial structure in the rapid growth of long-term accumulation of many contradictions, but also formed a strong external force to promote industrial upgrading.China's current so-called pillar industry does not grasp the core technology, that is, "hollow" problem.　　Therefore, China urgently needs to cultivate new pillar industries. Third, we should actively deal with the "dollar Trap".　　It is not easy to deal with the huge risks of our massive holdings of foreign exchange reserves. From the point of view of financial investment, there are not many channels for us to choose. In addition to the necessary balance between the dollar, the euro and the yen, the choice is to shorten the bond period as much as possible.　　At the same time, we should grasp the favorable opportunity of financial crisis, increase the proportion of foreign direct investment and equity investment, and reduce the proportion of debt investment. From the point of view of the monetary system, we should gradually improve the international settlement of RMB and the ability of international investment by means of RMB internationalization, and form a partial substitution of RMB against US dollar.　　From the financial security point of view, especially in the future, the possibility of large depreciation of the dollar, still need to adhere to moderate regulation, reduce the impact of large-scale international capital flows. To resolve the pressure of external storage, in particular, reducing the increase, an important channel is to reduce domestic savings, while the growth of domestic savings mainly from the government and enterprises, therefore, should be through the enterprise profit distribution, tax reduction, income distribution reform measures to increase the proportion of residents ' income, improve the social security system and other means to improve consumption capacity and reduce savings　　At the same time, we should convert money-form savings into consumer durables, education and research and development, and reserve the capacity for long-term competitiveness. From the point of view of purchasing power. We need to take comprehensive measures to convert as much money as we can to real goods, especially for China, in order to ensure that foreign exchange reserves do not depreciate significantly. In this process, on the one hand, we should maintain a reasonable appreciation of the renminbi and the pace of appreciation, on the other hand, we should reduce economic growth, reduce the international demand and so on, so that the international major commodity prices have a more obvious decline, and can continue to a certain time, to take advantage of opportunities　　Invest and reserve the important products we need. In short, during the "Twelve-Five" period, our important task is to restructure the economy rather than to pursue high growth, and to focus on guarding against potential crises rather than expecting the sun to shine in post-crisis times.