(Economic Watch) Dialogue between China and the United States Former Finance Ministers: We need to withstand the pressure of "decoupling"

　　China News Agency, Beijing, February 11 (Reporter Wang Enbo) Entering 2022, the new crown epidemic has been extended to the third year, and the prospects for the recovery of the world economy are unpredictable.

The content of a closed-door dialogue between former Chinese Minister of Finance Lou Jiwei and former US Secretary of the Treasury Henry Paulson at the Global Wealth Management Forum Shanghai Suhewan Summit was made public on the 11th.

They all believed that in the face of numerous challenges, China and the US need to withstand the pressure of "decoupling" and strengthen dialogue and cooperation.

　　In the face of inflation, insufficient labor supply, tight supply chains, and energy crisis, international institutions such as the World Bank and the International Monetary Fund have lowered their forecasts for global economic growth since the beginning of this year.

　　But in Lou Jiwei's view, the plight of the global economy is not entirely applicable to China.

China's epidemic control measures to prevent imports from abroad and prevent domestic rebounds are relatively effective, and there is no inflation.

He expects that the fiscal and monetary policies of various countries will be adjusted this year, reducing the pressure on price increases, but the biggest uncertainty for the world is still the epidemic.

If the vaccine can be universally and effectively vaccinated, the flow of people and goods can gradually return to normal, and the global recovery will be relatively strong.

　　Paulson agrees that the biggest problem right now is the pandemic.

He was concerned about the lack of coordination among countries and the rise of protectionism in this context, and warned that protectionist acts such as tariffs, as well as the increasing number of technology blockades, are in danger of "going to the extreme".

"We need to withstand the pressure of 'decoupling', and the global mechanism will become more and more important in the future."

　　Represented by the Federal Reserve, the spillover effects brought about by the shift in monetary policy in major economies are being closely watched by all parties. Will this lead to a new round of financial crisis?

　　Lou Jiwei said that what needs to be paid attention now is that when the ultra-loose monetary policy is withdrawn, it is very easy to trigger those possible risks.

"Especially when asset prices in some countries have reached a high level, if the timing or intensity and pace of fiscal and monetary policy withdrawal is improper, it is likely to trigger a crisis."

　　Lou Jiwei also mentioned that the global financial crisis in 2008 was different from the current situation.

At that time, Wall Street institutions held a lot of "toxic assets", and once the chain bankruptcy would bring about a systemic crisis, the solution was completely different from now.

Another difference is that the current global leverage ratio is high, and there are not many tools to stimulate economic growth.

In this case, the spillover effect of the Fed's policy shift is also much larger than last time.

　　"Financial crises always happen." As the US Treasury Secretary during the last global financial crisis, Paulson bluntly said that as long as there are financial systems and financial markets, and people can withstand market panic, financial crises will occur.

He mentioned that, after going through a difficult time in 2008, he learned that global cooperation in times of crisis is very useful, so it is very important for the United States and China to have dialogues in the fields of macroeconomic policy and finance.

　　Paulson recalled that in 2008 and 2009, he worked closely with his Chinese counterparts to avoid the worsening impact of the crisis, and since then has seen China escape its own predicament by implementing economic stimulus measures and avoid the global economy heading for recession.

"We never know when a crisis will come, but we need to be prepared to act quickly."

　　Talking about how the United States and China can cooperate, Paulson said that although the political systems, values ​​and economic systems of the two sides are different, there are also very important common interests, such as climate change issues and the stability of the global order.

Both sides need to develop a framework to determine where and how to compete and cooperate, and how to deal with differences between the two countries.

　　"We can certainly cooperate, and we must cooperate." Paulson looks forward to seeing more cooperation between the United States and China in the field of trade and jointly promoting some institutional changes.

But for now, the first thing to focus on is working together to tackle the Covid-19 crisis.

　　Lou Jiwei also agreed that China and the United States have room for cooperation in addressing climate change, public health crises, and security.

He also mentioned that some of the current practices of the United States are not conducive to both China and the United States. For example, imposing additional tariffs on China will actually increase the burden on American consumers. "The United States will suffer from these things."

In this context, the cancellation of additional tariffs is beneficial to American consumers, and it is also conducive to suppressing the current high inflation in the United States.

(Finish)