Vibs
FULL MEMBER
- Joined
- Jun 15, 2011
- Messages
- 1,535
- Reaction score
- 0
China does not need such high foreign reserves: Yu Yongding
Siddhi Bajaj / 10:40 , Jul 28, 2011
Prof Yu Yongding is an Academician with Chinese Academy of Social Sciences (CASS), former Director- General of Institute of World Economics and Politics (IWEP) (1998- ), Professor with Post- Graduate School of Chinese Academy of Social Sciences, President of the China Society of World Economics (2001- ), Editor of China and World Economy, Associate Editor of Asian Economic Policy Review. He was formerly the academic member of the Monetary Policy Committee of the People's Bank of China (PBOC) and member of National Advisory Committee of the 11th Five Years Plan of National Reform and Development Commission (NDRC). He is a foreign member of Academie Hassan II Des Sciences Et Techniques, Royaume Du Maroc. He has co-authored and edited more than 10 books, and published numerous papers and articles on macroeconomics, international finance and other subjects in various academic journals and mediums.
Yu Yongding reiterated his stand that China should not buy more US treasury bonds as the risk of a US default downgrade looms large if the August 2 deadline of raising US debt ceiling is not met.
Siddhi Bajaj of IIFL gives you the highlights of a media interaction in Mumbai at the sidelines of the Exim Bank Commencement Day Annual Lecture in Mumbai.
What will China do if the US debt defaults?
China hopes that there will be no default. However, if there is, the consequences will be disastrous, not only for the United States but also for the world. China does not need to hold so much of US treasuries. In the future though, China will use a gradual approach and try to diversify away from US treasuries. There are not too many alternatives for China or any other country. There are a few days (for the Aug 2 deadline of raising US debt ceiling) left but China and other countries which hold significant US treasuries should come together and talk about this because panic selling would not be in anybodys interest.
How does China plan to diversify its assets?
With the problems in Europe and Japan, the alternatives are limited. China will increase direct investments in the Asian countries, in developing counties and other developed nations such as those in Europe. We also want to invest in the United States if they would welcome our investments.
What other measures apart from monetary policy action is China taking to rein in inflation?
Apart from monetary policy, we have other policy instruments in China. We also use fiscal policy measures. We use not only market instruments but also non-market instruments. For good or bad, these policies are effective in controlling inflation.
Would China let its currency strengthen to reduce its foreign exchange stockpile?
In my personal opinion, the Peoples Bank of China should reduce its intervention in the foreign exchange market. If they do so, it means that they continue to add US treasuries to the forex stockpile which is not in the interest of China. PBOC should allow the reminbi to float but because of the effect it might have on Chinese exports; I do not think the PBOC would do so.
Do you see India overtaking China in terms of growth?
I hope you (India) can overtake China. I have no problem with that as then there will be competition. Indians are traditionally very patient. They can be slow at this stage but because they are slow they have quality growth and they can catch up in the future. Chinese people, on the other hand, are very impatient and want to see fast growth and want to catch up with the advanced economies quickly. But, if we grow that fast, the quality may be lower. If you see the twelfth Chinese five-year plan, the average growth rate for the next 5 years is a conservative 7%. But the Chinese economy has been growing at 10% for a while now and it is impossible to sustain such a growth rate. Its a miracle in itself that China is the second largest economy. So we should now be modest and humble and we are waiting for India to catch up with us.
Will the PBOC raise rates again after it did in April?
Well, it depends on the situation and on the way inflation is going. So we will have to wait and watch. However, I believe that inflation levels in China will come down and monetary policy in China may not be as tight in the second half of the year.
Interview of China does not need such high foreign reserves: Yu Yongding
Siddhi Bajaj / 10:40 , Jul 28, 2011
Prof Yu Yongding is an Academician with Chinese Academy of Social Sciences (CASS), former Director- General of Institute of World Economics and Politics (IWEP) (1998- ), Professor with Post- Graduate School of Chinese Academy of Social Sciences, President of the China Society of World Economics (2001- ), Editor of China and World Economy, Associate Editor of Asian Economic Policy Review. He was formerly the academic member of the Monetary Policy Committee of the People's Bank of China (PBOC) and member of National Advisory Committee of the 11th Five Years Plan of National Reform and Development Commission (NDRC). He is a foreign member of Academie Hassan II Des Sciences Et Techniques, Royaume Du Maroc. He has co-authored and edited more than 10 books, and published numerous papers and articles on macroeconomics, international finance and other subjects in various academic journals and mediums.
Yu Yongding reiterated his stand that China should not buy more US treasury bonds as the risk of a US default downgrade looms large if the August 2 deadline of raising US debt ceiling is not met.
Siddhi Bajaj of IIFL gives you the highlights of a media interaction in Mumbai at the sidelines of the Exim Bank Commencement Day Annual Lecture in Mumbai.
What will China do if the US debt defaults?
China hopes that there will be no default. However, if there is, the consequences will be disastrous, not only for the United States but also for the world. China does not need to hold so much of US treasuries. In the future though, China will use a gradual approach and try to diversify away from US treasuries. There are not too many alternatives for China or any other country. There are a few days (for the Aug 2 deadline of raising US debt ceiling) left but China and other countries which hold significant US treasuries should come together and talk about this because panic selling would not be in anybodys interest.
How does China plan to diversify its assets?
With the problems in Europe and Japan, the alternatives are limited. China will increase direct investments in the Asian countries, in developing counties and other developed nations such as those in Europe. We also want to invest in the United States if they would welcome our investments.
What other measures apart from monetary policy action is China taking to rein in inflation?
Apart from monetary policy, we have other policy instruments in China. We also use fiscal policy measures. We use not only market instruments but also non-market instruments. For good or bad, these policies are effective in controlling inflation.
Would China let its currency strengthen to reduce its foreign exchange stockpile?
In my personal opinion, the Peoples Bank of China should reduce its intervention in the foreign exchange market. If they do so, it means that they continue to add US treasuries to the forex stockpile which is not in the interest of China. PBOC should allow the reminbi to float but because of the effect it might have on Chinese exports; I do not think the PBOC would do so.
Do you see India overtaking China in terms of growth?
I hope you (India) can overtake China. I have no problem with that as then there will be competition. Indians are traditionally very patient. They can be slow at this stage but because they are slow they have quality growth and they can catch up in the future. Chinese people, on the other hand, are very impatient and want to see fast growth and want to catch up with the advanced economies quickly. But, if we grow that fast, the quality may be lower. If you see the twelfth Chinese five-year plan, the average growth rate for the next 5 years is a conservative 7%. But the Chinese economy has been growing at 10% for a while now and it is impossible to sustain such a growth rate. Its a miracle in itself that China is the second largest economy. So we should now be modest and humble and we are waiting for India to catch up with us.
Will the PBOC raise rates again after it did in April?
Well, it depends on the situation and on the way inflation is going. So we will have to wait and watch. However, I believe that inflation levels in China will come down and monetary policy in China may not be as tight in the second half of the year.
Interview of China does not need such high foreign reserves: Yu Yongding
