- 2018-12-11
Former Chairman of the Export-Import Bank of China Li Ruogu ——Rationally evaluates RMB’s entry into
The renminbi was included in the SDR (Special Drawing Rights) currency basket, and this action was even rated as "the most important economic event of 2015."
On November 25-28, 2015, at the invitation of the Thailand-China Cultural and Economic Association, Li Ruogu, Vice Chairman of China Peace Foundation and former President of the Export-Import Bank of China, went to Thailand to participate in the "21st Century Maritime Silk Road" international seminar. As one of the most internationally influential and internationally experienced financiers in contemporary China, he commented on this in an interview with reporters: We should rationally evaluate whether the renminbi will join or not join the SDR, and avoid excessive hype. Regarding the external expectations of RMB depreciation, Li Ruogu believes that there is no need for such worries. Such expectations are more of a speculation, and China's economic strength is the basis for the value of the RMB.
Talking about RMB’s entry into the basket: China’s application to join the SDR has greater symbolic significance
Reporter: The International Monetary Fund will decide whether to include the RMB in the SDR. What do you think is the significance of entering the basket?
Li Ruogu: SDR accounts for 2% of the world's foreign exchange reserves, and almost no countries use it in foreign trade transactions. Therefore, joining or not joining is more of a psychological effect, and the symbolic meaning is greater.
The Japanese Yen joined the SDR very early. It is one of the four currencies in the current SDR currency basket. When it was added, it accounted for about 8%. Now it is about 4%. The reason behind it is Changes in Japan’s economic and trade power.
In contrast, I am more concerned about the performance of the economy and the strength of foreign trade. If the economy is strong and foreign trade is strong, naturally he (the International Monetary Fund) will invite you to join. So I said, if China must join the SDR, he will put forward a lot of requests like this. As China's economic strength grows, it would be better for him to invite you to join. Isn’t it better?
Reporter: Did we apply to join SDR before?
Li Ruogu: I'm not quite sure. As far as I know, it has happened in the past year or two. It must be made clear that I am not opposed to joining, but I believe that joining or not joining should have a normal mindset. To develop and improve the Chinese economy wholeheartedly, with this as the foundation, just like Li Ruoguyu and singing Peking Opera, "With this bowl of wine at the bottom, I can deal with any kind of wine" (Note: "Red Lantern" episode) With the strength of economic development, all kinds of things can be dealt with. Therefore, China's most important task is to seek development without distraction, to truly increase its economic strength, and then talk about other things.
Reporter: In other words, if the RMB is included in the SDR, will it not be greatly affected?
Li Ruogu: There will definitely be some influences in the initial stage. For example, the RMB exchange rate will appreciate, and some people may be more optimistic about China's economy. This is some short-term influence, but the long-term influence will depend on their own economic development and strength enhancement. .
Reporter: Based on the recent U.S. dollar's exchange rate at around 6.38 yuan, the RMB against the U.S. dollar is hovering near the lowest point in 2015. The outside world is worried that after entering the basket, the yuan will enter a depreciation channel?
Li Ruogu: The renminbi has entered a relatively free state where there is a range of fluctuations between the ups and downs, and gradually liberalize more controls and become a more free currency. Appreciation and devaluation are normal.
How much did the dollar depreciate? From the earliest US$35 per ounce of gold to more than US$1,000 per ounce of gold, how many times has its value depreciated? The exchange rate of RMB against the US dollar only changed from 6.22 to 6.38, only to have a change of 1.6 cents. Why should it be said that it has entered a downward channel?
We still have to look at this issue in a normal way. Many of the devaluation and appreciation of the renminbi are the result of market speculation. The government's function is to maintain the stability of the exchange rate as much as possible. However, the most important thing for the stability of the exchange rate is economic strength. If the economy and import and export trade are strong, the exchange rate cannot be too problematic. China is still one of the fastest-growing economies in the world. Why should there be such concerns?
On economic growth: focusing on structure is more meaningful than focusing on numbers
Reporter: China's imports and exports also dropped sharply in 2015. The Ministry of Commerce predicts that the export scale in 2015 may be the same as in 2014, and imports will drop sharply. The annual growth rate of foreign trade may be zero. What do you think of this situation?
Li Ruogu: Imports have fallen more because of the impact of the world economic situation. Demand in other parts of the world has fallen. This is unavoidable under the current world economic situation. Now China’s export performance is not as good as everyone thinks, and it is also related to the adjustment of the domestic economic structure. Because of the structural adjustment, some export products have also declined.
I think the main thing is not to look at the downward trend, but to look at the structure of export products, whether it is more high value-added or low value-added, which can better reflect the level of China's import and export trade.
The economic development of any country has tortuous, ups and downs, and ups and downs. When encountering difficulties, there is no need to panic or feel very frustrated. The key is to concentrate on improving your own economic efficiency and labor productivity, and solve this problem. The growth rate of import and export trade is not the main problem.
Reporter: Some commentators believe that 2016 will be the "hardest year". What do you think?
Li Ruogu: If it really seems that some people say it is "the toughest", isn't the dawn ahead? The more difficult the performance and the more problems, the closer to the good. The coldest time of winter is after spring. This is a cyclical change.
Reporter: Now that China's GDP growth rate has exceeded 7, the "13th Five-Year Plan" is expected to be no less than 6.5. In other words, when there will be worse times in the future, when will it bottom out and then gradually rise?
Li Ruogu: Actually, there is no need to pay too much attention to the growth rate. It is necessary to pay special attention to improving economic efficiency and labor productivity. This is the most critical issue in China's economic development. Our current economic efficiency is low, labor productivity is low, even if you have a growth rate of 20%, it is ineffective growth. Labor productivity is low, economic efficiency is poor, investment is too much, output is too little, no matter how high the growth is, it is useless.
Reporter: How to solve this problem?
Li Ruogu: It is necessary to guide investment in areas with higher economic benefits, rather than in repeated construction and industries that are ready to be eliminated. For example, the automobile industry looks good now, but it may be environmentally friendly and electric vehicles in 20 years, and now it is about to turn in this direction. If you still stick to the original manufacturing industry now, you may encounter difficulties in the future.
Don't always look at the growth rate and whether it has bottomed out. I don't think this makes much sense. Now is to concentrate on improving investment efficiency, economic efficiency, and labor productivity. It will be more meaningful than talking about whether it has bottomed out. I have seen some figures, such as labor productivity. We are one-tenth to one-seventh of that of the United States. If it is raised to the level of the United States, how much room is there for growth? The economic benefits are as well. For example, we now spend more than 20 yuan for every 100 yuan of investment in machinery and equipment, while Japan, Europe, and the United States are more than 60 to 70 yuan. If this ratio is raised, how much room for growth is there?
Talking about the China-Thailand High-speed Railway Project: To build the China-Thailand Railway into a demonstration project
Reporter: So in the current economic situation, it is particularly crucial to put forward the "Belt and Road" initiative and promote infrastructure construction and cooperation with countries along the "Belt and Road"?
Li Ruogu: It is not only for us to gain room for growth. For example, it is better to make the cake bigger, so that everyone gets a bigger piece? Or is it better to grab someone else’s cake and use it to make your share bigger?
These are two development concepts. One is "mine is mine, and yours is mine". This is a "zero-sum game". The more I am, the less you are. The “Belt and Road Initiative” is a mutually beneficial idea that benefits multiple parties. Together, we make the cake bigger, and in the end everyone gets a bigger piece.
This is also complementary to our domestic economic development and adjustment of economic structure. For example, if the domestic production capacity is relatively large, it can be handed over to the countries that do not have it and need it. In this way, the excess production capacity will be transferred, and the industrialization of other countries will also progress. After our surplus advanced production capacity is transferred out, we can also vacate our cages and develop other manufacturing industries. This is mutually beneficial.
Reporter: The "Belt and Road" involves more than 60 countries. How much does it cost for such a large amount of investment and cooperation in infrastructure along the route?
Li Ruogu: ADB estimates that it needs 800 billion US dollars a year. Where can I find so much money? It is impossible to rely on China as a single country, so we still have to rely on everyone. "Everyone has to mobilize neighboring countries and even developed countries. All countries willing to participate must mobilize and participate."
At the beginning of some projects, China may have to invest more energy, manpower, and material resources. For example, the China-Thailand high-speed rail requires more effort, but I believe that once it is built, it will play a role, and there will be more at that time. Of investors are interested in investing and cooperating in more projects.
Reporter: China-Thailand high-speed rail cooperation project negotiations have gone through many rounds and encountered many difficulties.
Li Ruogu: I think these difficulties can be overcome. Some projects in China-Thailand, China-Laos, and China-Myanmar all have demonstration effects.
In the China-Thailand high-speed rail project, part of the money from China and part of the money from Thailand is required. In the beginning, the government played a bigger role, because no one saw the results and felt that there might be risks, so they would be more cautious. Don't be pessimistic that funding will become a problem because of such a large project investment and such a large amount of infrastructure construction. But as long as you do it step by step and turn this project into a demonstration project, the following things will be easy to handle.
Reporter: Are you optimistic about the China-Thailand high-speed rail cooperation project?
Li Ruogu: After the railway is completed, it is likely to be profitable, and it may even go to the market.
In the future, if visa arrangements are made to facilitate personnel exchanges, several countries along the route can pass through the passport of a country, just like the Schengen visa of the European Union, plus freight, this railway is likely to be insufficient . China has a population of more than 1.3 billion, and ASEAN has a population of more than 600 million. With a population of more than 2 billion, the demand for personnel exchanges and cargo transportation will be huge. How can it be uneconomical?
After (railway) becomes a profitable industry, it may be packaged and listed. After the listing, the government has recovered its investment and can build a second railway. When potential investors see a good project, they will actively participate in the investment. So don't worry about funding. Everything is difficult at the beginning. As long as you have a good beginning, you can expect good results.
Talking about the Belt and Road Initiative: If you just talk and don’t practice, others will have doubts
Reporter: After so many years of international finance, how many countries have you been to along the "Belt and Road"?
Li Ruogu: Almost all of them have been there. Among the more than 60 countries, except for a few countries in Iraq and Syria, they have basically been there because they cannot go to war.
Reporter: Some experts said that some countries have doubts about China's "One Belt One Road" initiative. Do you feel that way?
Li Ruogu: It is normal for some countries to be more active and some countries to have reservations. Generally speaking, the doubtful view is not mainstream, because any country is willing to develop and will not miss development opportunities. The “Belt and Road” initiative is a good opportunity for development.
The doubts about the outside world are not to hype, but to actually do it. For example, in the past few years, the Export-Import Bank of China built more than 3,000 kilometers of roads in Cambodia. This in itself is the content of the "Belt and Road" construction. If such things are done too much, the people will benefit, and they will naturally believe it. If you just talk and do nothing, others will have doubts.
Therefore, I especially suggest that every year we should make a plan so that every year we can see the results of actual progress and win the trust of the people. In the future, the voice of doubt and doubt will naturally fade away.
China, Thailand, and ASEAN have strong economic complementarities, and there is a lot of room for cooperation. Many of China's needs, such as grain, rubber, and tourism, will bring many benefits to these countries.