Li: Inflation remains a cost-driven solution to fiscal policy

November 20 Afternoon news, the Central Bank Monetary Policy Committee member, Tsinghua University Finance Department director Li, said at Renmin University's China Macro-economic forum, China is still the cost-driven, structural inflationary pressure, rather than demand-driven inflation.　　He suggested that the problem should be tackled with financial policy. Inflation has two mechanisms, a mechanism is the usual mechanism is more money, the financial expansion too fast, the people's demand increases, supply is not keep up, so the overall price rise, this is the aggregate demand is driven by the inflation mechanism and phenomenon.　　And the cost-driven inflation is that the cost is too high, enterprises can not resist, enterprises will be through various means to the cost of upward pressure to consumers. In his view, China's economy is still abundant and even surplus in production capacity, and the mechanism of rising prices in the 80 and early 90 is completely different.　　Therefore, the current price increases are mainly cost-driven, because of labor costs, the increase in international raw material prices and environmental protection and energy-saving requirements for carbon reduction. In response to this cost-driven inflation, he suggested that policies should be comprehensive, mainly in the supply side, mainly on fiscal policy. "A little more tax, a little more subsidy for some departments, so that the production capacity of short-term shortage of agricultural products or vegetables to increase supply, while appropriate control of a little hoarding, investment behavior, so that prices eased." "In addition to the National People's Congress on the same day the expected price reduction of 20%, he disagreed, he said that the possibility is very large, because today's real estate problem is a profound institutional problem, not simple one or two policy adjustments can be adjusted." In addition, if from the social level, if the real estate prices are really 20% downward, the public's mentality, public opinion will be a huge shift, at that time to the policy makers and the policy community are forming enormous pressure, this prospect is relatively small.　　(Yuanping from Beijing) The following is the transcript of Li's speech. Fellow leaders, distinguished guests, fellow students, teachers, good morning!　　I am very happy that every time I come to the people's University to participate in the macro situation of the seminar, each time give me a great shock, this time especially prominent. Every time I come to the NPC to attend such meetings, I feel the shock and the sense of disparity, I was from Tsinghua University, Tsinghua University economic discipline is the penis, you are Big Brother, it is true, I counted the report of 18 people, 18 Arhat, 18 Generals, in a piece to do such a report, Tsinghua do not, Tsinghua can do 18 professors to engage in a nuclear power reactor, but do not have this ability to do economics, so every time I come to this is very shocking, especially students, two hours, still standing behind, not a few exits, but the number is increasing, this is indeed the economic precipitation and the ability to reflect the place,　　It is worth studying at Tsinghua University, indeed. This report does have a lot of bright spots, not only the academic foundation, the basic work, textThe application of search, methodology is very mature, many conclusions I highly agree, many views do coincide, especially some forecast data, and our October 16 Tsinghua University China and the World Economic Research Center released figures coincide, we forecast next year GDP is about 9.5%,　　Your forecast is 9.6%, we forecast next year CPI is about 3%, such a report I can not make specific suggestions, I would like to change the point of view of this report to add a little. On the report of the macro-economic situation let's take a closer look at the era of the economy today, what are the fundamental factors of the times that play a role? In my opinion, we are in a very special time, we are in the post-American era after the financial crisis, in the words of Zakaria, the editor-in-chief of Newsweek, the world's only hegemony after the collapse of the former Soviet system and the Eastern European system in the early 90, and into the 20-year American era, What is the greatest feature of the post-American era that we are now entering?　　is a dual track. The United States and other developed countries in the very long process of "healing", the financial crisis is a traumatic, traumatic blood although has stopped, but the pain caused by the ongoing progress and manifestation, this is the United States and developed countries. In particular, China's economy has entered a strategic structural adjustment period, from the United States, the most important thing to heal, the bottom line is what?　　is to prevent the Japanese-style 20-year deflation era, deflation period. Last week Singapore took part in the Asia Investment Forum, where former US president Bill Clinton delivered an important speech, saying that I now have no need to run for any government position, and I can tell the truth about how vibrant the Japanese economy was in the 1985, when the Japanese Government was together and highly operational,　　Japan's technology is a global leader in many ways, it is distressing that Japanese companies are far more competitive in many ways than other developed countries, with confidence in their people, through 20 years of deflation, the loss of Japanese morale, the decline in Japanese operations and the inability of the financial system to support the development of the real economy.　　Americans in this day and age, in any case, the U.S. economy can not enter the 20 Japanese-style recession, deflation period, if so, for the U.S. economy, the United States and the international situation is disastrous, we are to expand the issue of currency, is to engage in the second round of quantitative easing, the Americans are not only by conspiracy.　　Chief Lee, I agree with that. Americans have conspiracies, through quantitative easing bets, and more importantly, the Americans are playing an overt one, to make it clear, I'm going to expand the currency issue, rather than create inflation, at the expense of failing to enter Japan's recession, worsening the US, and understanding the main intent of US quantitative easing. In this sense, quantitative easing in the United States is not a bad thing for China, which ended a week ago at the 20 summit, precisely becauseWith the introduction of quantitative easing, which makes the exchange rate of the renminbi a minor issue, the 18 countries that attended the meeting blamed it on the United States, and the contradictions shifted and the focus shifted. Personally, I think it's a good thing it is because of the American deviant, from the traditional economics textbooks, in response to the financial collapse and then quantitative easing, we can also say that you accuse the renminbi policy is not in line with the textbook and economics, you do not meet, precisely because of quantitative easing, we have to engage in capital controls, We're going to hedge, we're helping America, putting hot money outside of China, and getting hot money back to America.　　We are the common interest, this is good to say, QE policy is not bad, the key to see how we deal with, not only to see how we deal with, and see how we in the international reasoning, this is the basic situation of developed countries. I reckon there will be some turbulence in Europe in the near future, at least one months in a week or two, and the Irish sovereign debt crisis will worsen in the near term, which is also in the interest of Europe, since Europe's bosses are not France, Italy or Britain. Britain is an island country, Europe's eldest is Germany, the Germans are now the European economy is a solo show, the German bank holds the biggest periphery country, the periphery country Greece, the Portuguese debt, the Germans certainly will take the hand to reorganize the younger brother, lets their economic system appear certain reform, has already established such a mechanism,　　Called the European Financial Stability Mechanism, and has already raised funds, the IMF and the European Financial Stability Facility have signed an agreement that once any country goes wrong, they will help, not just aid, but more importantly, the Germans to join the IMF in putting conditions on those countries.　　In turn, China, my judgment and the report really coincide, we have entered the cycle of structural adjustment, we have entered the cycle of domestic demand rise, I am particularly pleased to see several statements in the report. One argument that consumption has contributed to growth this year has become the eldest, 55%, I particularly agree, and the report also said that the trade surplus this year from 190 billion U.S. dollars to forecast 184.1 billion, my forecast is 180 billion dollars, what is the concept of this number?　　This figure suggests that this year's trade surplus has fallen from 7.9% of GDP before the financial crisis to about 3.5%, a huge drop, which should be said internationally, and should be mentioned in the report. I propose to add such a percentage, not to the absolute numbers, to the percentage, but also to the financial crisis before the comparison, internationally speaking. is not the international let me appreciate, the purpose? Promote global rebalancing and reduce the trade surplus, to promote the decline of the US trade deficit, we have done it, 3.5%, has surpassed the group of 20 leaders agreed, and finally did not reach agreement 4% of the target, as a technical supplement, it's 4% including investment income, we call the current account, this is easy to speak clearly , the key to China's economy is to reduce its trade surplus, notThe balance of the regular account, since the balance of the current account also includes the return of 2.5 trillion of dollars in foreign investment, that does not count as a balance, stabilizing, rather than destabilizing, effect on the world economy. The trade surplus is the core, we have fallen, so in my opinion, in less than three years, we are fully likely to make significant progress in the narrow adjustment of macro-economic structure and achievements, this matter should be repeated with foreigners, and the foreign people say, I go abroad to talk to others, as soon as I met foreigners to speak with foreigners, There are too few people to say this, after this reason is clear, the exchange rate problem is reduced to a relatively minor issue, after the question is clear, the Chinese contribution to the world economy is not clear, the moral level of occupation of the commanding heights, the current trade surplus of Americans is still 4%, before the crisis is 6%, is still very high, who creates trade imbalances?　　It is not China, but the United States, this matter to repeat, this is the highlight of the report.　　Here I would like to focus on two specific issues to do a little supplement, one is the price problem, the second is the real estate problem. The price problem seems to me to be very clear about why prices are rising and what are the basic mechanisms?　　I know that there are 7 and 8 mechanisms in the report, and the chief executive has said a lot of reasons, and in my opinion, policy analysis may need to grasp the main contradiction, and the way to deal with it is multi-faceted, but make it clear. The main problem, in my view, is still a cost-driven, structural inflationary pressure, not demand-driven, what does it mean?　　We have studied economics, inflation has two mechanisms, a mechanism is the usual mechanism is that the currency is more, the financial expansion too fast, the people's demand increases, supply is not keep up, so the overall price rise, this is the overall demand too fast to stimulate the mechanism and phenomenon of inflation. What is another mechanism?　　The cost is too high, so the enterprise cannot resist, the enterprise will pass the cost upward pressure to the consumer through various ways, this is the cost-driven. It seems to me that the brain should be very clear, what is the basic situation of China's economy? Or in the main sector, the vast majority of the production capacity and even surplus, and the 80 and early 90, the mechanism of rising prices are completely different, the basic situation is still insufficient domestic demand, overcapacity, or a large number of manufacturing capacity exists there, even if there is no, as long as a shortage,　　There will be a lot of money and entrepreneurial investment right now, which is the basic pattern and I don't think there should be any controversy. If we agree to this analysis, we should see that today's price increases are mainly cost-driven, labor cost promotion, behind the reason is the gradual reduction of rural surplus labor, Lewis inflection point basically came, this is the big good. For the macro economy, there is also pressure to increase costs. Second International raw material prices, the third environmental protection and energy-saving requirements to improve, so that enterprises operating costs, which is also necessary. These three things are the main reasons for the rise in prices, including agricultural productsIs the same, why do agricultural prices rise?　　The main reason is that farmers do not want to farm, the relative surplus of labor, agricultural production costs are increasing, coupled with short-term weather factors, this is the main mechanism. An ancillary mechanism is sufficient liquidity, as high as 10 trillion dollars, the world's first, our money stock in the world first, so much liquidity, in the short term can be exploited, drilling loopholes is what? Garlic, ginger, the characteristics of these products are analyzed in the report is very clear, are relatively small amount of stock, relatively in the spot market can do some short-term hoarding, can hoard a year?　　Short-term operations have funds, basic supply requirements lead to the accumulation of behavior can not be long-term implementation, there has been a rotational phenomenon, from garlic to ginger, from ginger to cotton. The basic situation can be seen clearly, agree to the basic analysis, the basic driving force is the cost of rising, our policy is better discussed, our policy should be all-round, mainly in the supply side, mainly the financial policy efforts, a little more tax, for some departments to give a little more subsidy,　　The price will be eased by increasing the supply of agricultural produce or vegetables with short production capacity and by properly controlling the accumulation and investment. This is a little controversial, at the same time, appropriate to adhere to the controllable, independent basis, to enlarge the range of exchange rate fluctuations, accelerate the reform of the exchange rate mechanism, the premise is controllable, not others give us pressure, but for the needs of China's economic adjustment, controllable, progressive, This is a cost-driven solution to the pressure on international raw material prices to rise. Through a number of policy portfolios, it may be possible in the near future to mitigate the pressure of price increases.　　In short, the price rise can not be simple and 80 's, 90 's situation is similar. About real Estate.　　The real estate report stressed that next year may appear 20% price drop, I noticed that this may be the highlight of the report, whether it is bright or dark, it does not matter, is a point of concern. I think that this possibility is not very big, because today's real estate problem is a profound institutional problem, not simple one or two policy adjustments can be adjusted.　　In addition, if from the social level, if the real estate prices are really 20% downward, I think the public's mentality, public opinion will be a huge shift, at that time to the policy makers and the policy community have a huge pressure, this prospect is relatively small. I think most likely, real estate development prospects in a year or less than a year time, about six months time the real estate price growth to and CPI or and GDP reduction index basic synchronization level, basically reached the goal of real estate control, key to the key, the real estate problem is not a price problem, It's a matter of mechanism. China's development of further industrial upgrading, urbanization must rely on the development model of new real estate, which requires us to seriously study and learn from foreign experience, especiallyIt is the experience of the modern market economy of the Chinese society, including the experience of Singapore, which deserves our attention in particular. The healthy development of real estate in the future depends on the establishment of an organic combination of government and market, which is compatible with the market mechanism of the new real estate, instead of today, it appears to be a free real estate market, but the foundation is a deformed foundation, including the government's land transfer policy, including high mobility, The high stock liquidity and the common people's long-term preference for houses, the preference of collection, the seemingly free real estate market will bring all sorts of distortions. Generally speaking, every time I come to the people's University is a learning process, in the future, you can communicate and learn from the people's University peers.