China’s top economists call for boosting theoretical confidence in private economy, transforming China into “great financial power”

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What China’s top economists are discussing on social media as of 22 November, 2023

China needs to boost confidence in private economy by means of theoretical innovation: Teng Tai

Since reform and opening up, the party and state have always firmly supported the development of the private economy – including the individual private economy; constantly emancipated thought, made prompt rejoinders and continually clarified erroneous remarks that have affected the development of the private economy. This has driven changes to our enire society’s understanding of the private economy. 

However, public opinion is still not completely free from the influence of certain erroneous ideas, such as the theory that the “private economy is leaving the scene” and the “new public-private partnership theory”, which has seriously affected confidence in China’s private economy and even caused a decline in the growth rate of investment in China’s private economy.

Completely eliminating the misleading influence of planned economy theory and thoroughly clarifying the erroneous remarks that affect the development of the private economy requires the completion of innovation in China’s theories of the private economy as soon as possible.

(Teng Tai (滕泰) is the president of the Wanbo New Economic Research Institute, senior visiting scholar at the Wharton School of Business, and adjunct professor at Fudan University, Renmin University and the Central University of Finance and Economics). 

China cannot become a great power without becoming a great financial power: Lian Ping 

The recently convened Central Financial Work Conference proposed for the first time the goal and necessity of transforming China into a great financial power.

After more than 40 years of development since reform and opening up, China’s economy has risen rapidly and become the world’s second largest economy, occupying an important position in the world economy. 

China’s financial sector has also grown rapidly, with the banking sector ranking first in the world, and the insurance, stock and bond markets ranking second. 

Finance has played an extremely important and positive role in domestic economic development. However, while China’s financial sector is large, it is not strong. Its product functions, market expansion capabilities, transaction capabilities, service methods and quality, and risk control levels are still far behind those of the financial sectors of developed countries. 

It is also far from the status of the Chinese economy in the world. It does not match its influence and is not conducive to the realization of the strategy of becoming a powerful nation.

China’s economic rise and quest to become a great power cannot be achieved without the support of becoming a great financial power.

(Lian Ping ( 连平) is the chair of the China Chief Economist Forum and founding member of the China Financial Forum).

Loan prime rate remains unchanged in November, expected to hold steady for remainder of the year: Minsheng Bank’s Wen Bin

On 20 November, the People’s Bank of China (being the Chinese central bank) authorized the National Interbank Funding Center to announce that the loan prime rates (LPR) are as follows: the 1-year LPR was 3.45%, and the 5-year and above LPR was 4.2%, both unchanged from the previous month.

There are several reasons why LPR quotations continued to remain “on hold” in November:

First, the interest rate for medium-term lending facilities (MLF) remained unchanged in November, so the pricing basis for the LPR has not changed.

Second, the cost of funds continues to be at high levels. The market-determined liability costs of banks are rising, and there is limited space for LPR reductions. 

Third, the interest rates on new and existing loans have fallen in tandem. The net interest margins of banks have continued to come under pressure, and the space for continued downward adjustments in the LPR has been relatively narrow.

Fourth, the central bank has called for maintaining the net interest margins and profits of banks at reasonable levels, which also means that LPRs and loan interest rates will remain relatively stable will not be excessively reduced.

(Wen Bin (温彬) is the chief economist of China Minsheng Bank)

China’s needs to seek new export markets due to post-Covid Sino-US frictions: Shen Jianguang

In 2022, growth in the value of China’s exports (denominated in US dollars) slowed to 5.9% in year-on-year terms. WTO data shows that as of the end of June 2023, China’s exports accounted for 14.2% of the global share, down 0.8 percentage points from the historical high of 15% in 2021. 

In contrast, the export shares of the EU and the United States increased by 1.3 and 0.6 percentage points respectively compared with 2021. As the overseas pandemic situation eases, the recovery of production capacity of major economies such as the United States and Europe has driven a rebound in their export share. 

On the other hand, the restructuring of the global supply chain will have a profound impact on Chinese exports. In recent years, China’s export share to the United States has declined rapidly. The reason behind this is continued economic and trade frictions between China and the United States and the restructuring of the global supply chain. 

According to data from the U.S. International Trade Commission (USITC), the share of imports from China to the US dropped rapidly from 21.6% in 2017 to 16.3% in 2022, with ASEAN, Canada and the EU picking up the slack. 

From January to August 2023, the share of Chinese goods in U.S. imports further declined to fourth place at 13.4%, lower than the EU’s 18.8%, while also behind Mexico (15.5%) and Canada (13.8%).

Under the trend of the restructuring of global supply chains, China has actively expanded its exports to emerging markets, which to a certain extent has offset the decline in exports to economies such as the United States and Europe. 

From January to October 2023, exports to Latin America, Africa, and Russia accounted for 7.3%, 5.1%, and 3.2% of China’s exports, for increases of 0.2, 0.5, and 1.1 percentage points respectively compared with the same period in 2022. Their combined share reached 15.6%. 

ASEAN’s share of China’s exports is at 15.4%, higher than the EU and the United States, making the region China’s largest export partner. In contrast, from January to October 2023, China’s exports to the United States and the European Union dropped by 15.4% and 10.6% in year-on-year terms, and their share of China’s exports fell to 14.9% and 15.1% respectively.

(Shen Jianguang (沈建光) is the deputy-president of JD.com and chief economist at JD Digital Group) 

Deeply plough the soil of financially inclusive development: Bank of Shanghai chairman Jin Yu

In 2013, the central government proposed the development of financial inclusion, and included it in the “Decision on Several Major Issues Concerning Comprehensively Deepening Reforms” (关于全面深化改革若干重大问题的决定). 

This kicked off the rapid development of financial inclusion. 

In the past ten years, financial inclusion at commercial banks has undergone fundamental changes in terms of scale and efficiency, breadth and depth of services, becoming an important force in supporting the real economy and promoting transformation and development.

During this period, the Bank of Shanghai has endeavoured to serve small, medium and micro enterprises, deepened its efforts with regard to financial inclusion, and promoted high-quality development of the entire bank through exploration and innovation.

(Jin Yu (金煜) is the chairman and party secretary of the Bank of Shanghai). 

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