Lin Yifu: Why don t I support the open solution of the capital account?

Lin Yifu, advisor of the forum and professor of the National School of Development of Peking University, and Yu Yongding, researcher of the Institute of World Economics and Politics of the Chinese Academy of Social Sciences; Forum members Ding Zhijie, Dean of the School of Finance, University of International Business and Economics, Guan Tao, Director of the Balance of Payments Department of the State Administration of Foreign Exchange, Lin Caiyi, Senior Economist of Guotai Junan, Xu Gang, Managing Director of CITIC, Yuan Li, Vice President of China Development Bank, Zheng Jingping, Chief Engineer of the National Bureau of Statistics; Xing Ziqiang, director of the forum and head of macro research of SAC China, Zhang Jialin, chairman of Beijing Aiyi New Financing Capital Management; Li Shan, Chief International Business Advisor of China Development Bank, Li Yun, Deputy General Manager of Strategic Planning Department of Agricultural Bank of China; Special guests of the forum, Sheng Songcheng, Director of the Survey and Statistics Department of the People's Bank of China, Ding Ningning, Researcher of the Social Development Research Department of the Development Research Center, Guo Jianwei, Deputy Director of the Second Monetary Policy Department of the People's Bank of China, Huang Zheng, Head of Investment Research of New Horizon Capital, Lu Feng, Professor of the National School of Development of Peking University, Lu Zhengwei, Chief Economist of Industrial Bank, Ma Qing, Director of China's Economy and Strategy of Tudor Investment Company, and Zhao Zhong, Founding Partner of Murong Investment; Shen Jianguang, Invited Researcher of the Forum and Managing Director of Mizuho** Asia Company, Zhang Bin, Director of the Global Macroeconomic Research Office of the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, and Zhang Ming, Director of the International Investment Research Office of the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, attended the meeting. In the first half of the seminar, Sheng Songcheng and Lin Yifu delivered keynote speeches on "Coordinating and Promoting Interest Rate, Exchange Rate Reform and Capital Account Opening" and Accelerating Capital Account Opening: Doing More Harm Than Good; In the second half of the seminar, members and guests of the pros and cons forum discussed the core issues such as the timetable for the opening of the capital account, the planning and risks of the roadmap.

The meeting was chaired by Wang Haiming, Secretary-General of the Forum, and co-organized by Shanghai New Finance Institute.

A sharp appreciation of the renminbi is easy to lead to a "lose-lose" Lin Yifu reminded that if the exchange rate of the renminbi appreciates sharply now, many enterprises engaged in import and export can understate the imported raw materials and intermediate products and overreport the final export products to inflate the surplus to arbitrage the income of exchange rate appreciation, and the current account surplus will expand. Foreign exchange reserves increase even more when both current account and capital account surpluses widen. Moreover, China's current overcapacity situation has been quite prominent, if the exchange rate appreciates sharply, it will make the situation of overcapacity worse, and may even lead to serious deflation.

Moreover, compared with Japan and Taiwan, China in the 80s of the last century, China's enterprises generally have a low level of management, low efficiency, and rely on bank loans for investment a lot, and if there is serious deflation, corporate profits will drop sharply. Even if it only appreciates by 20 percent, many businesses will go out of business. At this time, the bad debts of banks that have been suppressed with great difficulty may quickly lead to an economic and financial crisis.

If this is the case, there will be capital flight and foreign exchange reserves could fall significantly. Lin Yifu said: At this time, there is a dangerous tendency for international financial speculators to speculate on the depreciation of the renminbi on the grounds that China's financial system is not sound, the proportion of bad debts of banks is high, and there are many hidden social debts. For China, to cope with the pressure of appreciation, it is only necessary to issue additional RMB, so it is relatively easy; To cope with the pressure of depreciation, it is necessary to use foreign exchange reserves to stabilize the value of the currency, and there is always a possibility that foreign exchange reserves will be used up, and it is relatively difficult to deal with them.

Therefore, when the value of the renminbi is not seriously undervalued and the domestic economy is not high, to eliminate the speculative pressure of international speculators with a sharp appreciation will play into the hands of speculators, and the national economy will pay a huge price for this, and may even lead to an economic crisis. Lin Yifu also reminded that before the pressure of RMB speculation disappears, foreign financial speculators may use some legal channels in China's capital account control, such as investing in China's real estate, to carry out dual speculation on the RMB exchange rate and real estate. Therefore, China needs to carry out the necessary control over real estate speculation to prevent the bubble of the real estate industry.

1. Yes. 2. The depreciation of the renminbi is a practice of the country to stimulate the economy under the financial crisis, which is conducive to increasing export competitiveness and maintaining economic growth. In the context of the general recession of the global economy, China has acted as a safe haven to promote the inflow of foreign capital.

3. The depreciation of the renminbi to prevent the flight of domestic capital;

4. The depreciation of the RMB is a response to the financial crisis, after the financial crisis eases and the domestic industrial structure is gradually transformed, the value of the RMB will naturally rise, and the RMB will still be favored by investors (speculators), and it is also the best time to inhale the dip.