Zhong Pengrong, a well-known economist and director of the Beijing Vision Consulting Center, who was known as one of the "Four Little Dragons" in China's economic circles in the 1990s with his outstanding academic achievements, shared many dry goods about the macroeconomy for the guests at the 2019 Global Economist Annual Conference. In an exclusive interview with Financial Headlines, Xinhua Daily's financial client, and Intersection News, he explained in detail the dialectical relationship between inflation and currency, GDP and welfare.
CPI does not fully reflect inflation, and prices are affected and sometimes stagnant
Zhong Pengrong was one of the earliest experts in the study of inflation in China, and his "China Inflation Research" published in 1987 was the first theoretical monograph on China's inflation in China. In this interview, Zhong Pengrong began with a clear meaning: "Many economic experts have a biased understanding of inflation, believing that whether there is inflation depends on whether the CPI rises or not, how much it rises. The first thing to do is to figure out what inflation is. ”
"Currency is the currency in circulation, inflation is more money in circulation, and deflation is less money in circulation." Zhong Pengrong described, "Inflation is like more rain, but this rainwater will flow to different places: some to Dongting Lake, some to Poyang Lake, and some to the Three Gorges of the Yangtze River for the time being." Let's not conclude that there was no heavy rain last night just because Dongting Lake wasn't flooded, but only because more rainwater flowed into the Three Gorges of the Yangtze River or Poyang Lake. ”
"There are more currencies, and the CPI does not necessarily rise, just like it rained heavily last night, and Poyang Lake may not be flooded." Because water has multiple directions of flow. Zhong Pengrong pointed out, "Similarly, there are several manifestations of more money in circulation. ”
"The first manifestation is that there are more tickets, more money but the price does not rise. Because of the planned economy, the price is fixed. But you can't buy anything with money. Zhong Pengrong gave an example, "In 1979, in order to buy two kilograms of pork in Wuhan, I did not sleep all night to queue up, and the next morning there was no pork." ”
"The second manifestation is the rise in the CPI, that is, the increase in consumer prices. For example, the price of pork and consumer goods has risen. ”
"The third manifestation is that house prices are rising. There are more currencies, and in order to preserve value, everyone goes to buy a house. The more you buy, the more you buy, the more you buy. Many families have invested their savings in a house for generations. Therefore, the frequent currency is mainly absorbed by house prices, the people have no money to consume, and the CPI rises very little. That was the case in our country for more than a decade. Zhong Pengrong said.
"To judge inflation or deflation, we cannot only look at the CPI, but also look at the growth rate of money and the amount of money added." Zhong Pengrong said, "At the end of September 2019, the balance of China's total monetary volume (M2) was 195.23 trillion yuan, an increase of 8.4% year-on-year. GDP growth is only 6.2%, and the monetary growth rate is 2.2 percentage points faster than the GDP growth rate. ”
"Inflation and rising prices are not just two different things, they are also different in time." Zhong Pengrong further pointed out, "China's inflation to price increases generally have a time lag of nearly a year, that is, this year there is more money, next year's prices will rise." If the frequent currency flows mainly to the housing market, driving up house prices, the time lag is longer. More money House prices are not rising, but after several years of currency accumulation, they have risen in a concentrated manner, and the price has increased by 80% or even doubled at a time. For example, the rise in house prices in Xiamen, Hefei and other places in previous years is the case. ”
The purpose of engaging in the economy is to engage in welfare, and resolutely stop the "wound economy"
"I suggest that economists should clarify two concepts." Zhong Pengrong stressed, "The first concept, a low increase in CPI does not mean no inflation. Do not confuse the concept, inflation is more money, inflation; after more money, its performance is not necessarily CPI rise, house prices rise, tickets are more are its manifestations. ”
"The second concept is that GDP growth is not equal to welfare growth, some GDP increases welfare, and some GDP reduces welfare." Zhong Pengrong further elaborated, "GDP growth, welfare does not necessarily increase; but the currency increases fast, the welfare of residents must decrease, because the people buy less and less money." ”
In his keynote speech on "Protecting Currency or GDP", Zhong Pengrong more clearly put forward: "As Yi Gang, governor of the central bank, recently wrote an article emphasizing, we must take the people as the center, guard the people's money bags, and do not let the people's tickets become 'mao'." ”
"Economists should not only look at statistics to study the economy, but also look at the people's rice bowl to study the economy, and see whether the people's rice bowl contains more or less things." Zhong Pengrong appealed, "The purpose of engaging in the economy is to engage in welfare. ”
"By investing in infrastructure to ensure DGP, all types of infrastructure investment will increase the CURRENT GDP, but not all of them will increase the welfare of the people." Zhong Pengrong explained, "Some infrastructure projects not only reduce the welfare of the current period, but also reduce the welfare of the people every year after that, because these infrastructure projects have long-term losses and require a large amount of government subsidies every year." Such an economic sector is called a wound economy, a bleeding economy. ”
"The central government has proposed three major battles, the first of which is to prevent and resolve major risks. How to prevent it? It is necessary to reduce the wound economy and not create new wounds. In Zhong Pengrong's view, those projects that have neither economic nor social benefits should be resolutely stopped, "inefficient and ineffective investment has become the source of financial risks." ”
Zhong Pengrong suggested that to increase GDP through investment, several changes need to be made to investment: "The main body of investment has shifted from local governments and state-owned enterprises to private enterprises, the source of funds for investment has shifted from loans to equity investment and capital market financing, and the main areas of investment have shifted from traditional infrastructure to new infrastructure, and to enterprise technology transformation, transformation and upgrading." He also added: "We must stabilize and encourage the confidence of private enterprises." ”
"Under the premise of preserving the currency, we must maintain useful GDP and GDP that can increase the welfare of the people." Zhong Pengrong concluded.
(Author Wu Chao)