Macroeconomic and Venture Capital Zhang Shuguang: macroeconomic and Venture Capital ? Moderator: Here is a famous economist, Economic Research Institute Beijing day is Mr. Zhang Shuguang, chairman of speech. Zhang Shuguang: Good morning, very pleased to be able to participate in Hefei Science and Technology Innovation and Venture Capital International Forum. This will open in Hefei, can be very important scientific and technological strength of a relatively strong Hefei, Hefei in the middle of the development is lagging behind some, but plenty of room for development. Really need to develop investment, then the venture is to promote the development of a very important tool, so this will put this place to open, I would like for the future development of Anhui Province, for the development of central will have great significance. TIEN Governor and Chairman of weeks we made a very important speech, I would like to macroeconomic and venture a few observations on the issue. We all know that reform and opening up, China's economy has indeed undergone a rapid growth in the face of China, great changes have taken place, if we are to count from 78 to 04 years, China's economic growth in GDP, 9.4%, China trading up 18% in 2004, we are more than 13 trillion total GDP, let's trade is more than 11 thousand billion. From an economic aggregate terms, China accounts for 5,6%, but the proportion of the world, from per capita terms, we even lower proportion, as over one thousand one hundred U.S. dollars now per capita GDP, which is very low level in the world , and China's recent wealth is 9387 U.S. dollars a recent World Bank estimates, and the United States far worse than we. But because relatively fast economic growth in China, China's economy in the world economy incremental proportion of increment which should be quite high, accounting for about 20 percent a few. Because of this, China will become a world economic stability and economic development into a very important force, but by the world's attention. Of course, before the period of macroeconomic trends for different views, such as China Center for Economic Research predicted that China's GDP this year to be down 8%, but also to deflation. Another view was that China's economic development is very good, basically a high-growth, the problem is not to prevent deflation, but rather to prevent a rebound, I think that both views may explain the complex situation of the current economic operation, from the end of January situation, although China in macro regulation, but not slow economic growth in China, an increase of 16% to August, the city's investment of up to 27% in August, so the speed is rather slow, However, some Chinese enterprises have another situation where the CPI we can say that very low inflation rate is very low and very high asset prices that real estate prices will be high, even to Shanghai where, indeed some of property price to be scary, and the CPI, CPI 1 to 1.3% in August so the shadow of deflation has enveloped our economy, it is worthy of concern. Why is the State's macro regulation and control of investment growth quite rapidly, I would like to have a very important reason is that the Chinese economy really in such a high growth situations described, and traction within the economy to promote the economic development at, but some I think the macro situation is supposed to do, such as real estate prices actually rose faster, benefits no one. Up too fast because inevitably a certain time, to drop down. After the macro-control on the economy will be great, not good on the developers, now you want to earn profits, high profit, once the bubble burst in what would result, urban residents do no good, you want to want, which is now the property of our urban population, 64% of real estate accounted for, once the house after the price cut, we can think about assets value on people's psychology and what is expected to be affected. There are no benefits for farmers, we now have more than 200 million migrant workers, most of which employment in the construction industry, once a falling house prices, real estate, a shrink, what benefits to farmers. What are the benefits for banks, and now developer of most of the loans come from banks, once the good assets into a bad asset, we think about how to get on days when banks. So I think that some of the problems is worthy of our attention. Of course, the short run the Chinese economy relatively fast at first, is due to the existence of the Chinese economy a huge potential for growth and development, but China's economic investments there are some potential risk, why do you say, I would like to discuss three aspects. First, we can see that China is a big country, the population, especially in many rural areas, and now they are in the process of high-speed city of them, and the development of urbanization, from theory, from a practical point of view, is a the process of rapid economic growth, because the efficiency of low resources from sector to sector higher transfer process is the process of people's incomes increase, we all know in 2004 the city's per capita income is more than 9000 yuan, while rural per capita income less than more than 3000 yuan, if the process of urbanization to the rural population to urban areas to improve the level of income, you will create much demand, with demand, can the economy can not develop it? Let's now less than 40% urbanization, urban population is about 400 million within a decade to 60%, China's urban population is over 800 million, this really made a vast market of China's economic development there is great prospects for China in a relatively long period of time which will see a rapid growth. But China's urbanization has Cunzai a lot of problems, because of some restrictions on our system, we can see that we now have Daliang of Renkou Suiran flow of Guo Cheng, over 200 million Nongmin now into the city, but the migration of the size of population is Henxiao , and there are several people in rural areas which settled in the city, but not settled will be a short-term plan, in other countries, developed country, the population migration is a one-way process from rural to urban areas, but China population migration, both flow into the city, but also flow back into the village, and not a small amount of flow back, and some developed regions the problem of shortage of migrant workers, it is relevant to this matter. If this issue we can not pierce it, we can see that rural and urban labor market is segmented, the city which the informal sector and informal sector labor market is segmented, so that the future for the Chinese economy there is a considerable development of negative factors. Is real estate, you think of farmers into the city will create a much later the market, but you have high prices, which can afford it. So I think this is a problem. There is also a problem, we can see that China's current economic development indeed there is a transformation process, but there is also a consumer upgrade process, we can see faster growth in real estate, automobiles has grown rapidly, production and sales increased rapidly. As for the various needs of modern means of communication is a lot of, a Spring Festival period, the light message to take 100 trillion a year, one cent, we think about is how much the market, optical telecommunications companies have made much money, we think about, we now do the upgrade there is a consumption process with the process structure is also compatible to upgrade, but there is also the case of heavy industry development, the process faster than light. Look to our growth is driven by investment, the investment ratio is already more than 40%, and the growth does not slow, a considerable amount of consumption, let's consume far more than in others, have much less energy use, and damage to the environment are also high. This is a very important issue which we can see our more than 20 years of reform and opening up our markets to market-oriented at a fairly large, and now more than 90% of the products have been liberalized, the market to determine its price, but our very sluggish market factors. Factors such as capital, is essentially a rule of the central and state-owned enterprises, we are not funding price liberalization, interest rate or by the central bank control, you can see we are in the lending rate is 6%, while the market interest rate how many, 12 percent. You calculate the interest rate on the capital this piece, it is not the interest. Let's land, basically ruled the government market, in the past three decades, the state received from farmers in recent years, local financial revenue from the land which took more than 1 trillion, do not say how many lost. It is for this reason that we the collective land rights of farmers with farmers contracting system, made possible largely agricultural land market development, you can see the agricultural land, essentially subcontracting also subsidizing the money, not a single market. State farmers to tax, basically allocated, nor a market economy, thus affecting the effective use of resources. Besides the labor market, we just said is split, and can see the foreign-funded enterprises and private enterprises are mainly dependent on the labor market, let the low price of labor, the Pearl River Delta, and I went last year in February, the daily wage of 25 farmers in Dongguan money, farmers less you give him a little money, a count, they would have many, many of the Government to do, such as working conditions of enterprises, this is also very poor, and indeed a harsh labor wages, which are impeding China's economic development. There is indeed the years of reform and opening up, a policy to encourage attract investment, encourage exports, encourage foreign exchange earnings from this policy, in an early stage of national development is necessary, we Chinese do as a world trade power, is indeed to promote China's economic growth, attract investment, as China's economic growth as a very important aspect, and foreign markets is the development of these years a very important condition, from a policy perspective, from the front view is correct, but if also used to treat the former view, then bound to be wrong, because of balance, we present economic performance has caused the middle of the cycle of two-way and two-way dependence, the so-called two-way cycle and dependence, from the real economy to look, we see that the Chinese economy growing rapidly, require large amounts of raw material, and China is also a shortage of resources of the country, so we need to import large quantities of raw materials, let's dependency on foreign oil 40%, imports of raw materials by China the production processes to complete the production, then Zaochu products, one is dependent on the external raw materials, manufactured products, we can not digest the domestic market has, in recent years, annual export growth of almost 30% this year, slower export growth, import, or to At this rate of growth. We are complete in the international market, said Marx converted from commodity money to complete its commodity demand. Let's product is dependent on foreign markets, from the money economy is concerned, we of bringing in large, large exports have become the bank's foreign accounts and money supply. Put more money, the central bank by issuing bonds to hedge and heading back to the recent withdrawn from circulation too little, you can see the money we increased rapidly, 8, 10 points more than the end of long, currency cycle is completed in China cycle, but we increased the foreign exchange accounts, but also not take up, but also in banks, foreign governments and businesses took the money and then to China for investment, but also the completion of the foreign currency circulation, and these two are wholly dependent on the international market, so that two-way and two-way cycle of the dependency can be said that China's economic growth is not a good thing. So I think that now, do we have to adjust our policies need to consider time. In this situation, there was much of China's economic prospects, but also there is really middle of the development of some potential danger. To maintain long-term stability of China's economic growth, really need our policy, institutional and make great adjustments. Of course, you can see our policy adjustments above these years great progress has, in this place because of the time, I would like to talk about exchange rates. We all know that as we two-way circulation, two-way dependence, allows us to more than a decade of time in which we are two surplus, the two remaining, this will cause to the exchange rate pressure. The adjustments to the existing exchange rate appreciation, but also to adjust the exchange rate regime, I see an aspect of this is not correct. From the appreciation of view, a 2% appreciation of the appreciation pressure also does not solve the problem, you can see the end of July, July's foreign exchange reserves increased by 21%, 1-7 months of 1457 U.S. dollars foreign exchange reserves, and last year's situation is similar to but recently we can see as the future revaluation of 2%, but also in appreciation of speculation, but the U.S. government is also pressure to China again, I think the adjustment of 2% is not about speed, but in tone, but to move, move than the fixed Well, this move, the next move on easily. A total of eight years we did not move, 97 years up to now did not move, so moving is not easy. From 2%, not moving, I think the current system can be described as "Four Unlikeness" because the exchange rate adjustment after four practices, one is a floating exchange rate, a release said in part that one basket, One is the small fluctuations, and now behold a kind of not. I want to see from this adjustment, the adjustment made after the conditions have a new, now you can go to expand its floating rate policy can also be used to manipulate, really prove that we are at this point is correct, is to improve of. But the policy of which there are many discordant things, although in this respect we on, but not with the other policy. After the exchange-rate appreciation is a tightening of the factors, you will need the appropriate policy adjustments, such as fiscal policy adjustment, we merged the two currencies, and income tax issues, the transformation of value-added tax issue is not pushed, it is very The important thing, since it is crunch factor, it should be a corresponding expansion of the factors to deal with it. Recently we can see that the policy to cancel the mortgage, since monetary policy, exchange rate on the forward market should be open, but the issue of the house have to cancel futures itself theoretically inconsistent. So I think the market for China's economic growth process, there are still many problems. Since we have the market economy, and corresponding social problems but also there is a lot of problems, education, health issues, social security, there are still many problems to be solved, only a good way to solve a series of questions, we have possible to ensure the healthy development of China's economy. And financial issues, more importantly, our investment, there are many relaxation, but in very good control of the financing issue, if the advance financing market and promote the liberalization of finance, I would like to us today meeting is also an important issue, it is necessary for the development of venture capital financing are you a series of liberalization, it may develop, I think this is China's economic growth in the future is very long and important issue, today's The conference will make a push in this regard, I think it was a good thing, thank you. American West, mainly by issuing bonds and funds, of course, carry out the project bond issue, the key one, I think that scientific proof, there must be income. Of course, in order to better support the development of high-tech enterprises, to develop our active financing, the Government including the National People's Congress in a number of laws and regulations to be amended. I, for example, local governments are not allowed to issue bonds is provided inside the Budget Act, the Government and the NPC is revising and research. Thank you.
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