01
Chinese experts prejudge too many mistakes, so that we are passive in the international arena
In recent years, the world economy has several major fluctuations, our economists are not very good to predict. For example, the 2008 financial crisis, before we did not predict, and some even predicted not to break out. I know that several economists in Goldman Sachs are predicting in advance and wrote a report.
Also, the price of oil at that time rose to $ 147, and our economists who did not expect oil prices would fall below $ 50.
An expert from the US President’s Economic Advisory Council asked us, “Are you prepared for a commodity price reduction in China?” Several experts from the Chinese side included me without any response. Because we did not think that commodities will be such a big price cuts, especially oil prices will drop so low.
In some important things we not only did not predict, there have been some miscarriage of justice. For example: the United States to fight Iraq and Libya. Some people say that the United States did not fish, but China and other countries to Iraq to buy a few oil fields, as if picked a cheap. In fact, this is a miscarriage of justice.
The United States to fight Iraq, playing Libya, the most critical is to ensure that the oil dollars. After these two wars, the oil had a significant price cut.
Because the United States shale gas technology has made a breakthrough. In fact, shale gas technology breakthrough has long been information, but no one predicted that the technological breakthrough will give the global energy structure, the energy industry has such a big impact, and no one predicted that this technology will cause the world Energy, economic and foreign policy adjustments and changes.
2015, the economy down, so there have been many shapes, while that is W-type, while the V-shaped, while that is L-type.
Why by the end of 2015 we judge the economy is down? Some analysis reports say that because the international financial crisis is not over, I think this judgment is unfounded. Because the international financial crisis has long since passed.
After the financial crisis in 2008, we engage in a few trillion of investment-driven, which is easier for the government thing, that is, batch project it! Banks have no restrictions on lending, which increases the leverage ratio. By raising the leverage ratio and expanding the investment, GDP is up again. GDP up tax has also been, there are employment.
However, this pattern can not be maintained for a long time. By 2015, this form of development efficiency has dropped dramatically. Investment in GDP decline, investment in the formation of assets decline, investment brought about by the decline in consumption, and then want to increase the leverage rate to expand the investment this road is not go.
There is an urgent need for us to study “what new and significant changes will be made in the future?” I think the new major change is mainly the new US President Trump’s China-related economic policy.
At first we can not win the election of Trump, can not implement his campaign in the economic policy, is not predicted. It is because of the early prediction of mistakes, which led to Trump came to power after we respond to his economic policy is not enough time, and even some passive.
02
China is not full of Trump research: I think the dollar will raise interest rates; Trump will launch a trade war against China; US manufacturing industry return and set off a wave of innovation; Trump tax will be successful.
Everyone in the study of Trump’s China-based policy, mainly confined to the economic level will have any impact on us? Obviously these studies and discussions are inadequate and inadequate. I think that there are four high probability events that require us to study and respond well.
(1) The first is the appreciation of the dollar.
Actually in the Trump before the presidency of the dollar on the appreciation, but also continue to appreciate. Recently the Fed issued a signal has been very clear. When the US economic growth reached 2% even if it is hot, it is necessary to raise interest rates to the economy to cool.
Now the US GDP is close to 1 percent more than 2 percent, while President Trump will eventually achieve a three percent growth. To achieve this goal, he also introduced a series of policies. America’s economic growth rate will certainly not decline. If you continue to rise, then the rate hike is a big probability event.
The Federal Reserve rate hike on China will produce at least two relatively large impact:
One is the domestic monetary policy.
Because a large part of our country’s currency is based on our foreign exchange reserves. All foreign exchange to our government, the People’s Bank acquisition, and then put the yuan out. So, the M2 M2 is a very important reason for the high GDP, because the amount of money released by foreign exchange is very large.
Now our foreign exchange reserves have fallen to about 3 trillion. In other words, the amount of RMB issuance may no longer increase or even reduce. Some experts say that China’s leverage and growth rate is positively related, to go to leverage will make GDP decline. By the end of 2015, the Central Economic Work Conference said that leveraging is “three to one drop.”
The Economic Work Conference in 2016 added a prerequisite for deleveraging, lowering the corporate leverage by keeping the total leverage constant. Implied meaning that the government and the residents of the leverage rate can be appropriately increased, but the total leverage can not be improved!
However, last year’s leverage rate has not been reduced, how can we be in the government and the residents have increased the leverage of the premise of reducing corporate leverage? This is a challenge.
This is in front of me as the number of foreign exchange issued by the RMB will be a substantial reduction in the link. So, in 2017 our country’s monetary policy, especially the change in the amount of money, is a very sensitive issue.
The second effect of the dollar’s rate hike is that there is no problem because the dollar is raising interest rates and the world’s capital flows to the United States. Now that the yuan depreciated against the dollar! Strictly say this sentence is not accurate, it is accurate that the dollar against the yuan.
why? Because the yuan and other currencies exchange rate is basically not much change, and the dollar on all the currencies are generally appreciated. This is bound to produce an effect, that is, the flow of funds around the world to the United States.
I would like to have some funds in China will flow to the United States, especially private enterprises funds. Because where the state capital to go, not where businesses look good where to go. But I believe that private enterprises, some funds will be with this trend and the United States.
Last year, our economy grew by six per cent. In the field of investment, mainly by state-owned capital support, private capital investment growth rate of only about 3%. And in the state-owned capital investment, more than half of the so-called infrastructure construction.
It should be said, such as high-speed rail, subway investment in a short period of time is not profitable, no return, it is such a pattern of investment to support our last year’s six percent.
2017, the dollar continued to appreciate in the case of the yuan, the number of our private enterprises are still domestic investment, which is a big question mark. If the growth rate of private capital investment is still not high, then the whole economic growth depends on what to achieve?
(2) Article 2 is a trade war. Trump said in the campaign that China should be identified as a currency control country. If so, he would give 45% of all the goods that China exports to the United States, which is prescribed by US law.
He even if we do not set the exchange rate control countries, he also have to take countervailing, anti-dumping and other trade war means, we export to the United States to increase tariffs on some commodities.
There are two signals worth noting: one is January 30 this year, the US International Trade Commission final ruling, said from China imported large washing machine on the US related industries caused substantial damage, decided to impose 32.12% to 52.51% of Chinese manufacturers Anti-dumping duties.
One is February 2, the US Department of Commerce ruled that imports of stainless steel plates and steel from China received subsidies, and at a reasonable price below the dumping in the US market, so he would add 75.60% countervailing duty rate.
These two tax increases are larger than those of the exchange rate control. I think that this matter is not finished, the future he will choose some goods to increase tariffs.
From these two signals, such a big tariff, is basically announced that the United States to completely eliminate these goods. Exchange rate control is only a means. I think that without this means he will also play a trade war.
03
US experts are studying how to fight trade war, and China is not ready for this
Not long ago, an American journalist spoke to our foreign press spokesman. The reporter asked, you China is not ready to fight with the United States trade war? Actually he is trying to test whether we have a plan in China?
The spokesman for the Ministry of Foreign Affairs replied that trade war is unfavorable to both sides, and we are firmly opposed to playing trade warfare! Said a lot of words, that is, did not answer China to fight not to fight trade war. It seems we are not ready, do not fight? how to spell? Not so good, so he only said that trade war on both sides are unfavorable.
How to fight In what form? What size is it? Maybe the Americans are still studying. Now the chairman of the International Trade Commission was originally a university professor, a few years ago this person wrote a book that is the Chinese goods to the US economy ruined!
Now he is the chairman of the International Trade Commission to solve this matter. Do you think he will be allowed to come from Chinese goods?
I think they are now preparing for the future but also what goods to choose, plus how much tariff? I think they are doing the program. How can we deal with this? In particular, what are the companies that we export to the United States and which will be included in the tax increase list? To be considered in advance. If the front of the 50% to 70% of the tariff, is basically the export of the United States to the channel to block.
(3) The third is Trump to make the manufacturing industry return to the United States.
Trump became president of many companies after the words, who do not withdraw the US production to whom tax increases, and now there are some companies agreed to return to the United States set up factories, including the United States own business, as well as Japan, South Korea, Europe and so on.
For China, a representative is Cao Dewang’s Fuyao glass. Cao Dewang to the United States to invest and set up factories What are the characteristics of it?
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His market was originally in the United States, he produced the car glass was originally sold to the United States GM, Ford. But he was originally produced in China, exported to the United States. Now he built the factory to the United States, produced in the United States, or sold to the United States GM, Ford, and some may also be sold to China. His market has not changed, but the production site changed.
A change in the production site, his costs have changed, there are some of the costs compared with China is certainly a gap. For example, how much energy is he using natural gas? How much is it in China? How much does he use to spend electricity in China? How much is his labor? There are a lot of comparison, I think this thing or market factors.
What is the most important thing? Is the US government is also investment. He spent more than 10 million dollars to buy a piece of land, and this land is neither in the east nor in the west, but in the middle.
This is cheaper, although it spent more than 10 million dollars, but because he hired 1,100 blue-collar workers, the government gave him $ 17 million, equivalent to that piece of land did not ask for money, which is investment. Now, Trump is able to run for success, it is important that he wants to find the blue collar of the job opportunities.
According to Cao Dewang, he hired the workers are more than 40 years old and no senior skills of workers. Now the US white-collar employment rate is very high, blue collar, especially the older blue-collar employment rate is very low. Therefore, Trump’s campaign program to restore the US manufacturing industry, is to solve the employment of a group of blue-collar workers.
I see more than this one, most likely in the world of enterprises outside the United States produced and exported to the United States of goods, his manufacturer is likely to have part of the move to the United States, including the BMW car. BMW had planned to build factories in Mexico and then sell it to the United States.
Although the cost of Mexico is cheaper than the United States, but Trump said you want to go to Mexico to build factories, I give you 20% of the tariff, you have to go to the United States to build factories I give you subsidies. Therefore, BMW has decided not to build factories in Mexico, and went back to the United States to build factories.
Although this is a case, but I think this is not a very occasional small probability event. I believe that including China, including other countries to export to the United States commodity production enterprises, and some will move to the United States.
I think China may be more than one Cao Dewang, more than one Fuyao glass. At present we are going to capacity, our steel surplus, coal, cement is also surplus.
Our home appliances such as washing machines did not exist the original problem, by his such a engage, a plus tariffs, a dozen trade war, exports can not get out, there will be a decline in demand, there will be excess.
2015, 2016, when we study the production capacity, did not consider the excess capacity of these products, it now appears that 2017 and the next period of time we have to consider.
04
The United States to reduce corporate tax can be achieved, China’s entire tax thinking to change
(4) Article IV is Trump ready to put his corporate tax from 30% to 15%. This he has already announced, but also to take legal proceedings, to go through the Senate, the House of Representatives to approve, it will take some time.
I think that he must do this thing. There are a lot of people who doubt this, how does he do so? My judgment, he is able to come down.
I think there are several factors inside: one is the United States still has the space to issue bonds. The world’s capital to the United States to go, of which a considerable part of his debt. The other is his military spending will save a part. At present he has asked the stationed countries to share the military spending of overseas US troops.
Recently, Abe has been prepared to pay more money, and NATO also proposed to pay in accordance with the share, I think the basic can be achieved. The third is his expansion of manufacturing, restoration of manufacturing, in fact, is to expand the US tax base. According to his previous argument, to make the US GDP to achieve growth of three percent.
For the United States, GDP from about 2% to 3% or even more, the tax base will expand nearly doubled. In other words, he side of the government spending, while expanding the tax base, but also can send bonds, and then doubt that he can not cut taxes, I think it is untenable.
I think that the United States has sufficient financial strength to achieve this tax cut. If the realization of the tax cuts, will attract more money to the United States to go. These funds to the United States, he will never engage in those low-end manufacturing, even we do not do anything he will not dry.
He will put these funds into the field of high-tech, focusing on encouraging enterprises to research and development and innovation, in this issue on the United States is a precedent. The 80s of last century, Reagan tax cuts, to promote the great development of the US IT industry, to the last century 90’s, the US IT industry on a big step.
The Soviet Union’s manufacturing industry, including Japan’s manufacturing industry, all left behind. Over 30 years, he began to cut taxes. I think the United States is likely to brewing a new invention and innovation. If this is the case, the economic growth of the late countries, the distribution of benefits in all aspects, there will be a new pattern.
For example, for Cao Dewang’s Sino-US tax rate comparison, the domestic there are two opposite views. Now the Politburo has made a decision to reduce the macro tax burden, some people say that our corporate tax can not be reduced, and this debate endlessly. If the US corporate tax really fell to 15%, I would like to our tax pressure will be greater.
It now appears that a country’s tax can not just use your country’s situation to demonstrate. In the era of globalization, the best tax rate is for the world, especially your competitors, is not alone in terms of their own. It should consider government spending on the one hand, on the one hand also take into account the global competition. Because now the enterprise is not only for the domestic, but for the world.
In the past, our tax theory, the textbooks I have learned, are for a closed economy, many of the policy effects are confined to a closed economy inside. I have any policy, what role can play.
When an economy is open, it is close to a number of open economies, the original closed tax theory, tax policy is no longer suitable for a number of new open economies.
We can not let the enterprise to improve the competitiveness of products in the world, but also consider the national tax policy in the global competitiveness, which requires us to make timely adjustments to the original tax policy, and even need to re-planning and design. This is what we are facing, the urgent need to study and deal with the major issues.