Robert Barro: US should be more open to China's trade and investment

Robert Barro: America should be more open to China's trade and investment. Reporter Guo Hongye Hu Keng in the global economic order and governance structure of profound changes in the present, as the first and second largest economies, there is a broad common interest but there is competition between China and the United States has attracted much attention. How can China and the US strengthen understanding and cooperation, assume the responsibility of the Great Powers and jointly address the new challenges of a turbulent global economy? At the beginning of the year, the board reporter interviewed the most influential economist in the world today, Mr. Robert Barro, vice president of the American Economic Society, to listen to the wise man's voice.　　Robert Barro in Macroeconomics, economic growth, monetary theory and policy and other fields of excellence, by the world Economic Community recognized as the future Nobel laureate.　　The board: What do you think about the US sticking to quantitative easing (QE2), which has been opposed by many countries, in the light of the apparent signs of recovery? Robert Barro: Quantitative easing is a threat to long-term inflation, and the Fed is planning an exit strategy to reverse monetary expansion. I don't think it will have any effect on China, especially if China can stop fixing its currency to the dollar, because even if the US is heading for a higher period of inflation, China can avoid inflation by appreciating faster.　　The extent to which China and other countries have reacted to QE2 is beyond my expectation, and I don't think it will have any effect on commodity prices, and there is not much correlation between gold and oil prices. It may be wrong to implement QE2 in the United States, but I don't think it's a big deal and it doesn't have much of an expansionary effect on the real economy. And because the nominal interest rate is already near zero, QE2 will not have any effect on interest rates. In fact, I am more concerned about a longer-term inflation problem, but even then I do not think it is a big problem and the financial market people are not worried.　　So, I think China may be overreacting, and I think it may be because China has too many annoying US Treasuries, fearing that the real value of those bonds will be negative.　　The Board of Directors: But QE2 has caused China's inflation to be in no small trouble, while the United States has not. Robert Barro: U.S. monetary policy basically does not consider the exchange rate issue, its main focus is to maintain price stability and maintain the good operation of the real economy. For example, in a period of weak economic growth, the United States has adopted an expansionary plan, but all this has not considered the exchange rate issue. Nor does the Fed attach much importance to the exchange rate, which has led to a near-zero inflation rate in the United States.　　While keeping the exchange rate constant, China will inevitably lead to an inflation rate of more than 0; for China, keeping the exchange rate constant is to match the long-term economic growth returns. All in all, China's inflation rate should be 3% to 5%, with inflation at 0, and China's inflation rate will be correspondingly higher if US inflation is raised by 2% or 4% while the nominal exchange rate remains constant. China once raised its exchange rate continuously, butIt stopped after 2008 years and I think it was a mistake made by China.　　China, of course, is also right because it has to consider not only the exchange rate against the dollar but also the exchange rate against the euro and other currencies, which will not necessarily change against the dollar in the event of a weaker euro and a stronger renminbi against the euro. The board: For some time now the Fed's monetary expansion and the simultaneous devaluation of the dollar have created a dilemma for Asian countries. Countries must adopt austerity policies, but improper rhythms can easily hurt the real economy.　　What are the appropriate suggestions from your research? Robert Barro: Inflation is an indicator that tells China it is time to raise relative price levels for the US and other countries. There are basically two ways to achieve this goal: one, to raise the exchange rate; second, to make China more inflationary than the US. And since China has been insisting on a policy of exchange rate stability, the second option is the only alternative, and the obvious inflation in China is due to this. Moreover, China's inflation will continue to deepen if the US is to have a higher inflation rate as a result of the recent expansionary monetary policy. The way to solve this problem is to change the exchange rate path to make it more flexible.　　In today's environment, the best strategy for China is to make the renminbi appreciate, and the real exchange rate should keep growing at an average of 4% to 5% a year for a specific period. "Board": for China and other western developed countries, Chinese companies to increase overseas investment at this stage is a mutually beneficial thing, but the rampant trade protectionism, which does not seem to conform to Western advocates of free-market economic norms.　　What do you think? Robert Barro: China has a huge current account surplus, and as a whole is bound to invest money in some places, and when US Treasuries are no longer in good shape, overseas physical asset investment plays a positive role, possibly in the form of buying companies from the US, Brazil or European countries. Of course, if the current account surplus is not so large, the problem will not be so obvious, because in that case, China can make domestic investment to meet consumer demand in the domestic market.　　But it's a big problem in the current environment. I think the United States should be more open to these investments from China or other countries, but in fact, in some instances, we find that there is a protectionist trend in the US. Of course, other countries will do the same, but the traditional United States has always been a leading country that is extremely open to international trade and overseas investment, so when it is no longer so open, discontent naturally comes.　　I think the United States should be more open to overseas investment and international trade. The board: China's asset prices, including capital markets, have risen sharply in recent years under the influence of foreign hot money and inflation, but many are worried about a collapse in bubbles.　　What do you expect from this? Robert Barro: I've always thought that investors ' earnings in the Chinese market can be "extremely unstable" and "risky" toDescribe。　　Perhaps markets can compensate for this high risk and uncertainty by raising real yields, but the volatility of market trends is so dramatic that it is almost impossible to recoup the so-called long-term investment if the time series is not long enough, even if the decade is not long enough. Let's take a look at the earnings of U.S. and Western European equities: the average real yield in the US is 8%, the annual volatility is ±20%, and other countries are more volatile. And, like Latin America, its volatility reaches 30% to 40% a year, so even though the average real rate of return is actually quite satisfying, the range of fluctuations is indeed a bit startling.　　I think China should also join this model to pay a higher expected real yield than the 8% per cent yield in the US market, and it will be ±20% than its 30%-40%. In the process of investment, people know that there are problems in the market, but they have not been able to find a suitable solution.　　These issues include corporate transparency, corporate governance, and so on, and these issues should be immediately reflected in prices, so that the market returns should be as I just described, otherwise there would be no equilibrium. (This interview was recorded by Gechangqing translator) Robert Barro (Robert Barro) Robert Barro, professor of economics at Harvard University, one of the most famous macroeconomics scientists in the United States, and vice president of the American Economic Society, who graduated from Harvard University in 1970 and received his Ph. D. in economics The main research areas are economic growth and macro-financial theory.