Zhou Xiaochuan: Hope surplus savings flow to developing countries

President Zhou Xiaochuan's speech at the global think-tank Couphen Ladies and gentlemen, I am delighted to participate in the first "global think-tank Summit" hosted by China International Economic Exchange Center.　　I would like to take this opportunity to discuss with you the global financial crisis and possible adjustments and policy responses to the international economy. First, we should give full attention to the causes of the financial crisis and strengthen the supervision of the financial crisis, the reasons are very complex, both macro and micro factors. We have heard that there are places where there is too much emphasis on the role of macro factors. But we see that this crisis started on Wall Street, a large number of irrefutable facts show that micro-factors play a very important role, including the micro-cyclical factors, credit rating agencies, market-focused and fair-value accounting standards, financial institutions lending standards slack, high leverage and corporate governance issues, The development of derivative products is excessive, the asset securitization that launches the placing mode is chaotic, and so on. These factors have been quite prominent in the crisis and have confirmed the dangers of lax regulation.　　Therefore, we should attach great importance to overcoming these deficiencies and problems in supervision. Ii. distribution of global imbalances in the financial crisis, we have also seen a number of macroeconomic problems, but the extent to which these issues have played a role in the crisis has been controversial, including the role of global economic imbalances. According to Chinese traditional philosophy, imbalance is absolute and balance is opposite.　　But there is an obvious irrationality to this imbalance, which is the high savings rate in the relatively low income countries and the excessive consumption of rich people in rich countries. It is stressed that China's savings rate is too high, the U.S. household savings rate is too low, both countries should reform. We are willing to work in this direction, while not easily exaggerating the role that two countries can play.　　The distribution of global savings flows is not yet available, but we have found a map of the distribution of current-account balances in the economies, which I used in my speech at the Malaysian Central Bank's senior seminar on February 10 this year. The chart shows that, while China's current account surplus is not small, it is only part of the global surplus, and not all, and the current account surplus in oil-producing countries, Japan and other Asian economies is not too heavy. In the case of a current-account deficit or a low savings country, the United States is a very prominent one, except for the Central and Eastern European countries, which account for a small share of the global deficit.　　Other economies are not significant in global imbalances. This issue has been taken seriously by the International Monetary Fund (IMF), which has led a lot of discussions over the years, with the focus on the issue of the balance of payments surplus to the savings glut. We are pleased to see that the household savings rate in the United States has risen to nearly 7% this May, but it also needs to be judged carefully if it represents a sustainable development. In general, structural adjustment is not so easy. The United States also has a public-sector deficit, particularly in the U.S. healthcare system, a reform that could largely determine the future trend of US total savings。 Figure: 11,990-2007 Current account balances for the economy. (Annual, 1 billion US dollars) third, the distribution of China's savings on China's high savings problem, foreign countries may not know enough. It is generally believed that China's consumption is too low to increase consumption.　　I have a picture here, which can show that China's problems are also related to the income distribution in the process of economic system transition. The ratio of household savings to GDP in China is actually fairly stable. 1992 is 20.3%, 2007 is 20%, period some fluctuation, low time to 17%, but basically keep at 20%; enterprise savings accounted for 11.3% in 1992 and 2007 to 22.9%, up by one; In the same period, the Government's public-sector savings accounted for more than 4.4 from 1992. % increased by 8.1% in 2007, and also rose nearly one times.　　Comparatively speaking, the government savings base is relatively small, and the large increase in corporate savings is more important. It should be noted that the high savings of Chinese enterprises is closely related to China's huge rural labor force. The rural surplus labor force seeks opportunities to increase labour productivity and is increasingly employed in coastal and urban areas and in the development of industrialization and services. This is essentially a process of urbanization. Until this process is over, labor costs are always relatively low.　　At this time, the decision of the rural labor force to stay in the land or into the city, mainly depends on the comparative benefits between farming and migrant workers, while other aspects of the policy impact relatively small. In addition, the company's Department of higher profits, due to the distribution structure of equity, the vast number of workers to share only a small amount of corporate profits. The party's 17 report clearly pointed out that the "creation of conditions for more people to have property income" is to solve this problem, this is the enterprise listing to transfer some of the state-owned shares to the Social Security Fund reasons.　　The pace should also be stepped up so that the public can share the high profits of the corporate sector. The optimal choice of China's structural adjustment is of course to expand household consumption, which will directly stimulate domestic demand and reduce the total saving rate. But it may be easier said than done. At a time when the pattern of income distribution has not changed dramatically, one suboptimal option is to maintain and expand the rate of investment, of course, to find effective direction and to prevent waste, then total savings minus total investment surplus (savings surplus) will not be so large, do not have a significant international impact. Obviously, too much industrial investment will lead to overcapacity. China still has a potential investment area is urbanization development, it for the future population migration, consumption conditions and service industry development lay a foundation. After all, China's urbanization is a trend that will last for many years. The chart is about the changes of China's saving rate (saving as a national disposable income) Four, the situation analysis of rebalancing adjustment of global economy there are several scenarios where global economic imbalances can be adjusted to rebalance.　　The analysis and policy orientation of different scenarios are also different. Scenario 1, it's a lot to talk about now, and what we most want to see is that the U.S. household savings and total savings rate are rising, ChinaHousehold consumption is also on the rise and global imbalances are being revised. This is the ideal. But structural adjustment involves a lot of problems and is not easy.　　At the same time, it is not possible to solve the problem easily, based on the short-term data just received. Scenario 2, the U.S. household savings rate is rising, not so much Chinese exports, China will show more overcapacity, lower equipment utilization, employment decline, so that China into the low GDP growth stage. We should strive to avoid this.　　A variant of Scenario 2 is that adjustments may be achieved by the fact that inflation leads to changes in real effective exchange rates. Scenario 3, the rate of household savings in the United States rose, Chinese residents ' consumption increased, but not enough, and urbanization investment increased, both of which led to a substantial decline in excess savings and outflow. In this process, the urban facilities, housing and service industry can be imagined to be greatly developed, which will support the future consumption and employment. This is also an acceptable option.　　But to the urbanization of investment and financing methods and tools to carry out the corresponding reform, such as the municipal bonds discussed over the years, such as issues. Scenario 4, the US household savings rate has risen, and China is no longer in need of so many Chinese exports, and it has shifted some of its capacity to other developing countries, including manufacturing exports, through "going global" investment. In terms of north-South relations, this will be beneficial to the industrialization of developing countries and their future consumption. This situation is also a good direction.　　By then, China's trade surplus is no longer the principal contradiction, and whether the US will turn a large trade deficit with other developing countries would be a major test. Scenario 5, the increase in the US total savings rate is not so smooth and sustainable, including health care reform may not be smooth, public consumption is still high, and China's adjustment is more smooth, some of the production capacity transfer, foreign trade to achieve a more balanced, or the remaining surplus savings will not flow to the United States, but diverted to other　　At this point, the United States may still have trade imbalances and savings flows in developing and oil-producing countries such as Vietnam.　　Scenario 6, the last thing we want to see is that everyone's adjustment is not successful, the current international economic imbalance pattern is still continuing, trade protectionism will become more and more serious. In short, there may be a wide variety of scenarios, we may not all be exhaustive, and finally there can be a mixture of some scenarios. I personally think that to see the difficulty, can not be too idealistic, a more realistic mix of the way out may be: China through greater reform efforts to expand consumption, urbanization has made significant progress, but given the high base of China's savings rate, there may be some surplus savings, I hope to more to the developing countries. This requires the support of the international financial institutions and the international monetary system to improve global productivity and income distribution, leading to more universal global growth. We also stress that this growth should be green.　　　　Moreover, from a demographic standpoint, developing countries will also be an important source of global aggregate demand. V. The tendency of personal understanding one is that the global economic imbalance is a need to pay attention to, but also difficult issues, but in the solutionIn the case of financial crisis, we must not neglect the micro-mechanism problems and improve the role of regulation to prevent the focus of deviation. The second is to analyze the causes and characteristics of global imbalances, and its interaction with the pattern of global economic development, different stages of economic development and income distribution in various countries.　　You can't expect to make structural adjustments easily with very simple tools. Third, along the above situation analysis, should strive to scenario 1, to avoid scenarios 2 and 6, further thinking and research scenarios 3, 4, 5.　　To this end, it is also necessary to design and promote reforms in an optional direction in order to achieve the corresponding changes. The scientific outlook on development developed by the Chinese party and government over the years has involved all aspects of these reforms and adjustments, including people-oriented, expanding consumption of domestic demand, environmental friendliness, urbanization, development of services, and the facilitation of investment and trade. Since the crisis, China has speeded up its economic restructuring and expanded domestic demand, making a lot of efforts to mitigate the negative impact of the crisis and sustain sustainable development.　　Although in the specific laws and paths still need to explore, experiment and understanding, I am convinced that the world to explore together, can find out the way out of the crisis and embark on a sustainable scientific development path. (This is the President Zhou Xiaochuan July 3, 2009 in "Global think-tank Summit" speech)