China's Fiscal Policy Dilemmas
By Yi-shan Chen
From CommonWealth Magazine
Published: March 26, 2015 (No.568)
Xiang Songzuo, chief economist at the Agricultural Bank of China, holds forth on China's fiscal predicament, government controls and the future of the yuan.
Xiang Songzuo, chief economist with the Agricultural Bank of China, doubles as deputy director of the Center for International Monetary Research at China's Renmin University. Born in 1965, Xiang is one of only a handful of Chinese economists who have worked their way up from entry-level jobs at the People's Bank of China.
After obtaining his master's degree in economics from Renmin University in Beijing, Xiang worked at the central bank's Shenzhen Branch for five years. Xiang steadily moved up the ladder, serving first as deputy director with the Capital Planning Office and then the Currency & Credit Office before becoming director at the Financial Debt Management Office, witnessing dramatic changes along the way as China opened up its economy and implemented market reforms. Only after the Asian financial crisis hit in 1997 did Xiang realize the destructive impact of hot money on the economy.
Xiang studied under Nobel Prize-winning economist Robert A. Mundell while pursuing a master's degree in international affairs at Columbia University at the turn of the century. Mundell, who is hailed as the father of the Euro, inspired in Xiang a strong interest in international financial markets. Late last year, Xiang published his observations on the global financial markets and the real economy in his book New Capital in the 21st Century (二十一世紀新資本論).
Hong Kong-born American economist Steven Ng-Sheong Cheung, who is hugely popular in China, has praised Xiang as an extremely well-read person, saying Xiang must have read more than twice as much as he has. On top of that, Cheung says, Xiang has the ability to organize problems based on their importance, something Cheung says is a "rather rare trait" among economists.
Since last year, China has repeatedly lowered reserve requirement ratios for banks to increase liquidity. After interest rates were cut twice and the yuan's depreciation against the U.S. dollar, observers generally believed that the People's Bank of China would embark on a looser monetary policy. Yet Xiang, who is familiar with the mindset at the central bank, takes a different view. In this interview with CommonWealth, Xiang thoroughly analyzed China's monetary policy, predicting interest rate and Chinese yuan exchange rate trends.
The following are excerpts from the interview:
Regarding the future market trends for the Chinese yuan, I believe that the yuan's depreciation against the U.S. dollar will continue for some time to come, but the scope of depreciation will not exceed five percent. It will, however, appreciate against the currency basket. Globally, the yuan is still the strongest currency after the U.S. dollar.
Tough Decision No. 1:
Structural Adjustment vs. Stable Growth
The yuan will not depreciate massively because the monetary policy of the People's Bank of China now faces two difficult, fundamental decisions, so there will be no large interest rate cuts.
The first difficult decision is, "How to coordinate stable growth while adjusting the domestic economic structure." China's 15 manufacturing industry sectors continue to face deflation, the producer price index has been on a decline for 40 consecutive months, the purchasing managers index (PMI) keeps hovering around the expansion-contraction line, and the manufacturing industry is in a deflationary state.
From this perspective, it seems that the People's Bank of China should implement an across-the-board loose monetary policy, including a blanket reduction of reserve ratios and interest cuts. Some people even think it should learn how to carry out quantitative easing from Europe, Japan and the United States.
However, certain sectors such as educational, medical and tourism services are not suffering from deflation but rather from significant inflationary pressure, continually rising labor costs and stubbornly high real estate prices.
If we adopt monetary easing, inflation in the service industry will worsen and real estate prices might go up further. The manufacturing industry, which has a severe overproduction problem, might be able to take a breather, but at the same time, it may not have sufficient resolve to reduce inventory, throttle back production, deleverage and carry out structural adjustment. Should that be the case, the accumulated problems of the past will only become worse until they become irresolvable.
Tough Decision No. 2:
Stable Exports vs. Internationalized Currency
The second difficult decision is, "How to coordinate export stability with the promotion of an internationalized yuan, the liberalization of capital accounts and the internationalization of financial markets."
If we first look at the latter, the yuan exchange rate should become freer and exchange rate fluctuations should become wider, forcing investors to bear exchange rate risks themselves.
But from the perspective of stable exports, we also require a relatively stable yuan exchange rate. Exporters even hope that the yuan depreciates markedly.
As it looks now, however, structural adjustment has become more important than stable growth. That's the main tune of monetary policy. Therefore, the People's Bank of China has been extremely cautious all along about a blanket easing of monetary policy, instead insisting on directional controls and directional easing while pursuing stable growth. Chinese Premier Li Keqiang has repeatedly said that China cannot again rely on strong stimulus measures or "overflow the market with liquidity."
Since stable exchange rates are the main goal of currency policy, the exchange rate will be gradually allowed to fluctuate wider, while capital account liberalization will take a secondary role.
Of course, the People's Bank of China will find it difficult to withstand pressure from various industries, local governments and investors as they demand interest rate cuts across the board. The People's Bank of China is not an independent central bank but a division of the State Council of China. The bank's governor, Zhou Xiaochuan, does not have the right to make decisions as independently as Janet Yellen, chair of the Federal Reserve Board in the United States, or European Central Bank President Mario Draghi.
Chinese Currency and Stocks Still Going Strong
The main reason why the yuan remains comparably strong is because the Chinese economy can be expected to maintain mid- to high-speed growth. Annual growth rates of 5 percent to 7 percent should not be a problem within the next twenty years. Therefore, China will continue on its path to becoming one of the major countries attracting foreign investment.
Trading on most stock markets around the globe has become delinked from the underlying economic fundamentals. The stock markets in the Euro zone, Japan and the United States have soared to levels far above those seen before the financial tsunami of 2007-2008, whereas economic recovery still lags far behind pre-crisis levels, even in the United States.
Therefore, stock markets can no longer serve as an economic barometer, as they have been drastically delinked from economic fundamentals. The situation in Chinese stock markets is similar. During the latter half of last year, Chinese stock markets soared while the economy continued to slow down. This trend will continue.
Chinese stock markets will likely continue to still register higher increases this year, mainly because of an influx of a considerable amount of capital into the stock market. The sources of this capital are a looser monetary policy, a cooling real estate market, more market-determined interest rates, a regulatory change in the IPO procedure from an approval-based to a registration-based system, as well as the launch of the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect schemes. In 2015, the Chinese stock market might become a capital-driven small bull market.
Overall risk in the Chinese bond market remains controllable. Although there will be isolated cases of default for individual corporate bonds, we won't see debt default on a large scale. Government bonds, local government bonds and corporate bonds will post somewhat higher growth. In comparison, bonds still constitute a safer investment opportunity.
政策兩難 人民幣不會大貶
2015-03-18 天下雜誌 568期作者：陳一姍採訪整理
中國農民銀行首席經濟學家向松祚，也是中國人民大學國際貨幣研究所副所長，一九六五年生，是少數從中國人民銀行基層工作起家的經濟學者。中國人民大學經濟學碩士畢業後，在中國人行深圳分行工作的五年，躬逢已故中國領導人鄧小平南巡。
他擔任資金處副處長、信貸管理處副處長、金融債權管理辦公室主任，一步一腳印參與大陸風起雲湧的改革開放。直到亞洲金融危機，見識到熱錢對經濟摧毀性的影響。
在紐約哥倫比亞大學留學期間，他師從歐元之父，諾貝爾經濟學獎得主孟岱爾，開啟了他對國際金融市場的濃厚興趣。去年底，他出版《二十一世紀新資本論》總結了全球金融市場與實體經濟的觀察。在大陸走紅的經濟學者張五常稱讚他，閱讀範圍極其廣博，至少是他兩倍以上。另外，有鑑別問題重要性的能力，是經濟學者中少見。
去年以來，中國接連降低存款準備率，放錢給銀行，又兩次降息，加上對美元走貶，外界解讀人行正在進行寬鬆貨幣政策。但熟悉人行思路的向松祚卻不這麼認為，在越洋訪談中，他深度解讀大陸貨幣政策的想法，剖析人民幣未來的利率與匯率走勢。以下為訪談紀要：
有關人民幣未來的走勢，我認為對美元貶值的趨勢會持續一段時間，但貶值幅度不會超過五％，對一籃子貨幣還會升值。人民幣仍然是全球僅次於美元的最強勢貨幣。
困難決策１：調結構vs. 穩增長
人民幣不會大貶，因為中國人民銀行的貨幣政策現在面臨兩個基本的困難抉擇，不會大規模降息。
第一個困難抉擇是「如何協調國內經濟的穩增長和調結構」。大陸十五個製造業部門持續出現通縮，生產者物價指數已連續四十個月下降，採購經理人指數（PMI）一直徘徊於榮枯線上下，製造業處於通貨緊縮狀態。從這個角度，人行似乎應該實施全面寬鬆的貨幣政策，包括全面降低存款準備率、降利息，甚至有人認為，應該學歐美日做量化寬鬆（QE）。
但其實包括教育、醫療、旅遊服務等等在內的行業，卻沒有通貨緊縮，而是存在不可忽視的通貨膨脹壓力，勞動力成本一直上升，房地產價格仍然處於高點。
如果寬鬆，服務業通貨膨脹就會惡化，房地產可能又漲；產能嚴重過剩的製造業可暫時喘息，但可能不再下決心去庫存、去產能、去槓桿、調結構，以前積累的問題將更嚴重，直到積重難返、無法解決的程度。
困難決策２：穩定出口vs. 人民幣國際化
第二個困難決策是「如何協調穩定出口，和推進人民幣國際化、資本帳戶開放和金融市場國際化」。從後者看，人民幣匯率應該更加自由，匯率浮動區間應該進一步擴大，讓投資者自己承擔匯率風險。
但從穩出口角度，我們又需要人民幣匯率的相對穩定，出口商還希望人民幣匯率大幅度貶值。
目前看來，調結構的重要性已經大於穩增長，這是貨幣政策的主調。因此，人民銀行對全面寬鬆的貨幣政策一直非常謹慎，會堅持定向調控、定向寬鬆，而且追求穩健。國務院總理李克強反覆說中國不能再搞強刺激，放錢不能再「水漫金山」。
匯率政策則將以匯率穩定為主，逐步放寬匯率波動幅度，開放資本帳戶為輔。
當然，人民銀行要頂住各產業、地方政府和投資者要求全面降息的壓力，並不容易。中國人民銀行並不是一個獨立的中央銀行，而是中國國務院的一個部門。中國人民銀行行長周小川，並不具有美國聯準會葉倫和歐洲央行總裁德拉吉那樣的獨立決策權力。
人民幣與陸股仍相對強勢
人民幣維持相對強勢的理由，主因是，中國經濟有望繼續維持中高速增長，未來二十年內維持七％到五％的增長，應該沒有問題。所以中國將繼續成為吸引外部投資的主要國家之一。
目前全球股市的走勢，大多與經濟基本面脫節。美國、日本、歐元區的股市漲幅，都大幅度超越金融海嘯之前的水平，經濟復甦卻遠遠沒有達到危機之前的水平，即使美國也沒有。所以，股市早已不是經濟的晴雨表，嚴重脫離經濟基本面。中國股市也類似。去年下半，中國股市大漲，經濟卻持續放緩，這個態勢還會繼續。
今年中國股市應該還是會有較大幅度的上漲，主要源自比較寬鬆的貨幣政策、房地產市場趨冷、利率市場化、公司上市，由核准制改為註冊制、滬港通和滬深通等等，相當部份資金會流入股市。二○一五年中國股市可能是一個資金驅動的小牛市。
中國債市風險總體可控。會出現個別企業債券違約案例，但不會出現大規模債務違約。今年國債、地方債、公司債都會有較大幅度成長。債市仍是比較穩妥的投資機會。
陸股ETF、人民幣存款續紅
已經紅了兩年的人民幣理財要退燒了嗎？答案是，一點也不。
用兩張圖表說明原因：儘管，從去年日本宣布新一波量化寬鬆開始，中國大陸也同步引導人民幣對美元貶值，四個半月貶值2.4％。
但從新台幣對人民幣的角度來看，同期，一塊錢人民幣由原先可換4.96台幣，升值到可換5.02元。（見表一）
如果由前年，台灣開放境內人民幣存款業務起算，存人民幣定存，光人民幣升值就賺了7％。
中國貨幣供給仍然緊俏
多數專家預期，美元除外，人民幣對多數貨幣長期升值的趨勢仍在。人民幣存款利率雖然會調降，但幅度有限。瑞銀證券中國首席經濟學家汪濤甚至預估，人行會再降存款準備率一到二次，不見得會降息。「大陸貨幣政策的所作所為，不能叫做放水或刺激，目的是為了降低企業與銀行體系的風險，只能說是保持中性，」她強調。
反映在利率上，人行2月28日降息之後，台灣不少銀行卻逆勢推出人民幣高利存款。「人民幣資金還是很緊，」永豐金首席經濟學家黃蔭基說，尤其是短天期的人民幣存款。
美元走強之後，許多原本借低率美元換成人民幣，賺匯差與利差的熱錢退潮，使得人民幣供給緊縮；加上大陸股市好，資金流向股市，大陸錢荒只是稍微紓解，因此利息降不下來。
黃蔭基建議，投資人不妨趁著新台幣對美元匯率仍在31元，相對強勢時，掌握換匯點，買一些人民幣。
至於各界一致看好的陸股，專家則建議，投資人可以買指數型基金（ETF）。
所謂ETF是指，經理人不主動選股，而是按照指數的組成與個股佔指數權重去配置股票。通常指數型基金買的都是大型股和藍籌股。
黃蔭基指出，美國三次大規模量化寬鬆，讓全球股市幾乎全漲破歷史新高，只有大陸距離歷史新高還很遙遠。大陸股市的歷史高點是2004年的6000點，但現在3300點上下徘徊。
「中國補漲行情剛剛開始，」國泰富時中國A50基金經理人鄭立誠也認為。陸股目前本益比約十一倍，陸股歷史區間為六到四十倍。
去年，中國證監會國際部主任祈斌演講中透露，中國即可能在近期編入MSCI新興市場指數。這意味者，國際資金長期將佈局陸股。
目前台灣發行的中國A股ETF共有六檔，規模最大的是，投資上海與深圳300檔股票的元大投信寶滬深ETF基金，與投資上海180檔股票的富邦投信FB上證基金。（見表二）
富時中國A50指數則是選擇深圳、上海最大的50家上市公司追蹤。譬如：跟上證A50比，富時A50就涵蓋中國最大地產商萬科、科技類股的比亞迪與京東方。
通常追蹤的股票愈多，選中中小型的機會就愈大，上下漲跌波動也會比較大。投資人可以比較手續費高低，並依照自己的投資屬性做選擇。
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