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Analysis on the Effect of Monetary Policy and Fiscal Policy in China in Recent Seven Years
-Talking about the mode of economic growth.
At the Central Economic Work Conference held at the end of last year, the central government decided to change China's active fiscal policy, which has been implemented for nearly seven years, into a prudent fiscal policy, thus changing the macro policy from "one active and one prudent" to "two prudent". This is another important measure against the local overheating of China's economy after the central bank decided to raise interest rates last year129. If raising interest rates is a temporary emergency measure, then this change in fiscal policy is strategic. It is necessary to discuss the concrete effects of macro-policy implementation in the past seven years, so as to provide reference for our future policy formulation and system reform.
The macro policy of "one positive, one stable" which lasted for nearly seven years.
By the end of 1996, China's austerity policy had successfully lowered the high inflation at that time and achieved a "soft landing" of the economy. Coupled with the impact of the East Asian financial crisis that broke out in 1997, China's economy as a whole fell into a state of deflation. In this environment of internal troubles and foreign invasion, China government decided to implement a proactive fiscal policy on 1998-after the establishment of People's Republic of China (PRC). Up to this fiscal policy adjustment, this overall positive macro-policy has been going on for nearly seven years, and macro-policies that can last for such a long time before and after are rare in the world.
(A) the proactive fiscal policy has a very obvious pulling effect on the economy.
On the one hand, the long-term construction bonds issued every year invest in a large number of projects, which directly increase the investment in fixed assets and stimulate economic growth. During the implementation of the proactive fiscal policy, the central government issued 654.38+00 billion-654.38+05 billion yuan of long-term construction bonds every year. From 654.38+0998 to July 2004, a total of 965.438+00 billion yuan was issued. However, this kind of capital expenditure of finance has a greater driving effect. In China, government funds play a guiding role. For example, when the government starts a project, banks compete for loans. This "government investment, bank follow-up" formed by the investment scale is quite amazing.
Theoretically speaking, although fiscal policy can directly stimulate investment, its effect is often discounted due to certain "crowding out effect". What needs to be pointed out here is that due to specific institutional reasons, China's fiscal policy had almost no "crowding out effect" during this period.
(2) The "active" monetary policy is quite weak.
With the start of proactive fiscal policy, macro-policy is accompanied by prudent monetary policy. In the view of relevant departments, the so-called prudent monetary policy is a policy that can prevent both inflation and deflation, that is, a prudent monetary policy. But in hindsight, our monetary policy was actually loose. The main reason is not that we nominally adopted a prudent monetary policy, but actually violated its original intention, that is, the money supply is still accelerating (the most important manifestation of a proactive monetary policy). On the contrary, during our prudent monetary policy, the broad money supply (M2) did not increase rapidly. Compared with the previous annual growth rate of more than 20% (even about 30%), the growth rate of M2 in recent years has been stable at 15. However, in recent years, China's M2/GDP has become larger and larger, especially after 1998, which is rare in the world. Moreover, the People's Bank of China has cut interest rates eight times since 1996, including five times since 1998.
Therefore, in these senses, our monetary policy is "positive". The role of monetary policy is manifested in two aspects, that is, with the expansion of money supply, interest rates decrease, so residents' consumption increases and enterprises' investment expands. However, from the practice of our country, the stimulating effects of these two aspects are not obvious. The main reason should still be to explain the excess currency. The following is just a general overview from two aspects.
From the perspective of money demand. According to Keynes's classification, money demand can be divided into transactional demand, preventive demand and speculative demand. In an economy, the change of transaction demand will not be great, but it will be bigger in economic prosperity and smaller in depression, but the difference will not be great; And preventive demand and speculative demand (the sum of them is equivalent to quasi-currency) often change greatly, as in China.
First of all, there is a great demand for currency prevention. There are many discussions about preventive savings in academic circles, that is, the uncertainties faced by China residents in the transition period have greatly increased, such as unemployment, future pension and children's education, which require a large amount of savings, and the marginal propensity to consume has been decreasing. The increase in consumption that interest rate cuts can promote is very limited.
Secondly, the high demand for currency speculation is perhaps the most noteworthy. As we all know, China stock market has always been characterized by rampant speculation. A large number of monetary funds from the private sector poured into the stock market to participate in virtual economic activities, so new money moved back and forth between the securities trading margin accounts and demand deposit accounts of enterprises and residents. Some scholars estimate that the proportion of funds entering the stock market in 200 1 year is 26.32% of that of M2 in that year, which shows that the absorption of money by the virtual economy is very amazing. However, because most of the funds pay more attention to speculation than long-term investment, the role of this part of the funds entering the stock market in substantive production is also very limited. Moreover, not only many residents with savings deposits participate in speculation, but more seriously, many enterprises themselves also invest a lot of productive funds in the stock market. We know that moderate speculation can enliven the stock market and benefit the development of the real economy, but excessive speculation can only be a zero-sum game or even a negative-sum game. It is just a game of wealth redistribution among speculators, which will not directly promote substantive material production, and may also have many negative effects.
In terms of credit, the credit policy has always been tight. The Asian financial crisis gave the China government enough warning, so the central bank suddenly tightened the credit supervision of commercial banks and implemented the loan responsibility system. Since then, there has been a credit crunch in China, and the "deposit gap" that began in the financial system in 1995 has been further expanded, reaching 4,905.9 billion yuan in 2003. Although the credit structure of state-owned banks has changed with the process of marketization, it is not substantial. It's just that it no longer lends money to inferior state-owned enterprises, but large and medium-sized state-owned enterprises with good quality still have abundant funds, while a large number of small and medium-sized private enterprises still have difficulty in lending. Because large and medium-sized state-owned enterprises have been relatively abundant in funds, interest rate cuts will not stimulate their loan demand too much, so the stimulating effect of interest rate cuts on investment in this specific system is not obvious.
From the above two aspects, we can see that on the one hand, the monetary demand of economic entities has been high, on the other hand, bank credit has shrunk, which makes a large number of funds deposited in banks unable to be converted into investment, that is, there are serious problems in the transmission mechanism of China's monetary policy, which finally greatly reduces the effect of "active" monetary policy, so that on the surface, China almost falls into a liquidity trap. At this time, looking back at the "crowding out effect" of fiscal policy is very obvious. Since a large amount of funds can't be converted into effective investment in the banking system, issuing additional treasury bonds has become a way to convert these funds into part of the actual total demand by purchasing treasury bonds. Bank loans and other social funds for national debt investment projects also have the same nature, so there is basically no "crowding out effect". However, it must be pointed out that this tiny "crowding-out effect" is the result of distortion under China's specific system.
To sum up, in the past seven years, our proactive fiscal policy has indeed played an unusual "positive" role, which is of extraordinary significance to ensuring economic growth in a specific period; At the same time, although the "active" monetary policy is not satisfactory, and the effect afterwards is very weak, it undoubtedly provides an unusually loose monetary environment for the effective play of the active fiscal policy, which is also a necessary condition for the active fiscal policy to play its role under the current specific state-owned enterprise system and banking system in China. Therefore, the central government's decision to change the proactive fiscal policy into a prudent fiscal policy is undoubtedly wise, because the past fiscal policy has obvious effects, and fading out is also conducive to effectively curbing the current local economic overheating. Moreover, because China's interest rate has not been fully marketized, the role of the central bank in using monetary policy in macro-control will still be very limited. Therefore, it is impossible for fiscal policy to fade out completely immediately, otherwise, the economy is likely to lead to recession and deflation again. This is probably the real reason for the adjustment to "stability" rather than "austerity". From this perspective, it is just right to change from "positive" to "stable". However, China's economic problems are largely long-term. Even if short-term economic fluctuations can be controlled, the economic growth model under this specific system cannot but make people worry.
Problem: The economic growth model is still not healthy enough.
From the previous detailed analysis, we can clearly feel the problems existing in China's economic growth model, that is, it still belongs to the "government-led" economy, and administrative intervention has not decreased, but has increased. Only seven years of active macro-policy has maintained economic growth (in fact, it has steadily declined), which determines that its growth model is still not healthy enough.
As some scholars have pointed out, our economy changed from resource constraint to demand constraint after 1997, but it must be noted that this progress is still quite limited, because demand constraint is not a market constraint, especially in terms of investment demand, which is mainly caused by the credit crunch ordered by the government. The constraint of consumption demand is also formed under the constraint of investment demand, especially the consumption demand of urban residents. As we all know, after the mid-1990s, China's economy bid farewell to the shortage. Urban residents' consumption of basic consumer goods and durable goods such as color TV sets, refrigerators and washing machines is basically saturated, and they begin to turn to the demand for high-end consumer goods such as cars and houses. However, these products are in short supply in the market, especially lack of personalization, and the shortage of supply is directly related to the credit tightening policy. At the same time, due to SARS in 2003, the credit policy was suddenly relaxed, which immediately triggered an investment boom in raw material industries such as steel, electricity, cement and real estate, which directly led to local overheating of the economy. But this is not a fever for no reason, but a concentrated release after years of repression, which is the inevitable result of strong consumer demand as a driving force.
On the other hand, due to the proactive fiscal policy, a large number of national debt projects have been launched and a large number of bank loans have been involved, but the feasibility and profitability of these projects are often insufficient or not considered at all. Therefore, in recent years, the overall investment quality of China's economy has to be worrying. These effects will take a long time to show. Although it has stimulated economic growth in the short term, the damage to China's economy may be long-term.
Therefore, although China's economic growth model has changed to some extent, it is still too early for us to judge its positive significance. On the contrary, it seems to me that its problems are not much less than before. In the process of implementing the proactive fiscal policy, the China government's intervention in the economy has become more and more serious. It did not change from direct intervention to indirect intervention, and then gradually withdrew, but returned to the track of direct intervention, that is, the economic growth model did not conform to the reform process. This is obviously not progress. Therefore, we should not overestimate the speed of China's economic development model. We must intensify efforts to solve the existing problems and actively promote the marketization process, in which interest rate marketization is the most critical one.
Direction of efforts: interest rate marketization is the most critical.
It should be said that under the market economy, it is also necessary to intervene (adjust) the economy, which is more important for China in the process of transition. Therefore, at present, China is not a question of whether to intervene in the economy, but that we have not yet formed an effective intervention model, that is, a market-oriented macro-control model, and interest rate is one of the most important means of market-oriented regulation. It is the specific institutional environment in China that causes the passive situation of the central bank in macro-control and the inevitability of administrative intervention.
In the absence of marketization of interest rates in China, once the economic overheating comes, the means and capabilities available to the central bank are extremely limited, and it is difficult to prevent the economy from fluctuating greatly. Specifically, the official interest rate does not really reflect the market interest rate, and quite a few times the deviation is very large (for example, the private interest rate has been above 10%, and we have cut interest rates many times in recent years, and the official interest rate is obviously much lower than the private interest rate, while the private interest rate reflects the market interest rate to a certain extent, that is, the real interest rate, and the tight credit policy has led to a large amount of funds circulating outside the body). The official interest rate deviates too much from the market interest rate. On the one hand, the central bank's fine-tuning of the economy will fail. For example, the difference between the two is 5 points, and you can hardly add or subtract 0.25 points or 0.5 points. This can also explain why China's economic entities seem relatively insensitive to interest rates on the surface.
On the other hand, if fine-tuning doesn't work, it will accumulate into a big economic fluctuation, and when the big economic fluctuation comes, the central bank will be even more helpless, because those means will not work when used in fine-tuning, and then it will obviously be even more insignificant. Therefore, administrative power will inevitably reappear, forcibly stop the project, drag down the economy, and further increase future economic fluctuations. On the one hand, our administrative forces have been interfering with the economy. Secondly, from the above analysis, administrative intervention is inevitable, otherwise there will be big problems in the economy, which is obviously not conducive to stability and development.
One of the most serious consequences of non-marketization of interest rates and credit discrimination is the extracorporeal circulation of a large amount of funds, which not only correspondingly raises the investment cost of small and medium-sized enterprises, but also inhibits a large number of investments that should have been made (generally speaking, China has abundant funds). More importantly, it has brought unexpected difficulties to China's macro-control, especially the central bank's economic control, so that the administrative forces have been unable to withdraw from economic intervention and it is difficult to make substantial changes to China's economic growth model. As one of the most important prices in the market economy, interest rate must be marketized in China as soon as possible, so as to create a good environment for the central bank to play an effective macro-control role in an all-round way, thus laying the foundation for the economic transformation to a healthier market-oriented development model. Fortunately, at present, the authorities have taken substantial measures to liberalize the loan interest rate.