(Focus on Boao) Multiple challenges meet How does the world economy "dance on a tightrope"?
Boao, March 3 (ZXS) -- Controlling inflation, economic growth and financial stability is a difficult choice facing the world's major economies today. How to find a balance between the three and dance the "dance on the tightrope" has attracted attention at the Boao Forum for Asia Annual Conference 29.
"At this point in time, financial stability is the most important thing," Zhu Min, vice chairman of the China Center for International Economic Exchanges and former deputy managing director of the International Monetary Fund, reminded that the recent succession of risk events such as Silicon Valley Bank and Credit Suisse has led to a widespread increase in financial instability.
Zhu Min analyzed that the main reason for the Silicon Valley Bank incident is that the Fed has long implemented quantitative easing policies, implemented zero interest rates, and then raised interest rates sharply in the short term, "these two things together will definitely create some crises." In his view, a new law has emerged in the current world economy: financial stability ranks first in importance, economic growth ranks second, and inflation control ranks third.
"If a year ago, I would have felt that inflation was the number one priority," said Piyush Gupta, chief executive of DBS Bank, adding that central banks have traditionally focused on the two tasks of job growth and price stability, but now they must stabilize the third target. When the financial system is unstable, there are negative spillovers that affect the whole world.
In the past 10 to 15 years, many central banks have claimed that financial institutions will not bail out in the event of a collapse, but they have crossed this red line. In the case of the Silicon Valley bank, for example, although it is not a systemically important bank, the Fed still has no choice but to provide a bailout. "It's a reality that we have to face."
Faced with the same multiple-choice question, Lu Lei, deputy director of China's State Administration of Foreign Exchange, gave a fourth answer - liquidity. He said that once the monetary authorities find that liquidity is depleted, so that the entire economy may be in trouble, and innocent banks and financial institutions will be damaged, they should provide relevant support. "But on the other hand, if the market cannot be cleared just for the sake of looking better, then you have to be very careful."
Ning Jizhe, deputy director of the Economic Committee of the Chinese People's Political Consultative Conference and former deputy director of the National Development and Reform Commission, also agreed that ensuring financial stability to avoid a crisis should be at the forefront of current policy goals. But he also believes that handing over the responsibility of "dancing on a tightrope" entirely to the central bank would be too much pressure. Last year, China achieved its inflation target well, in sharp contrast to the high global inflation, which is related to the joint efforts of the central bank, the Ministry of Finance, the National Development and Reform Commission and other departments.
Ningji Zhe further pointed out that the intensification of global inflation in the past two years has a lot to do with the poor industrial chain and supply chain, and supply-side policies and trade policies also play a role in it. As a major resource importer, China's economic recovery has not boosted world inflation, with China's consumer price index (CPI) increasing by 2.1% year-on-year in the first two months, and the industrial producer price index (PPI) falling year-on-year. At the same time, smoother exports will also provide developed countries with high-quality and cheap goods, which is the basis for maintaining low inflation in developed countries such as the United States over the past decade.
Ningji Zhe stressed that in response to global inflation, we cannot only understand the problem from between countries, but also combine demand policy, supply policy and trade policy in accordance with the law of globalization, so that "dancing on the tightrope can become a wooden plank." (End)