Beijing Forum 2009: Nov 8 Stanford University Panel
Yingjie Exchange Center, Peking University, Nov 8, 2009: As one of the three special panels on high-level academic subjects in 2009 Beijing Forum, the Stanford University Panel opened at Meeting Room No. 4, Yingjie Exchange Center on the morning of November 8th, continuing the discussion of impacts of the financial crisis on China and China’s responses. Professor Nicholas C. Hope, Deputy Director of the Stanford Center for International Development chaired the seminar.
The Stanford Panel of Beijing Forum is an affiliation of Beijing Forum, which aims to build a platform for scholars from Stanford and Peking University to conduct face to face dialogues and promote high-level academic communications.
The theme of the Stanford Panel was “The World in Crisis: Financial Pressures from Abroad, Impacts Inside and China's Responses.” Four established professors who had strong research background in China or East Asia’s economy shared their latest research findings on the issue and exchanged ideas with the Chinese scholars.
The first speaker, Ronald I. McKinnon, William D. Eberle Professor of International Economics in Stanford University, discussed the hotly debated issue of whether China should stabilize yuan/dollar rate in the context of global financial crisis. He stood against the U.S. pressure on China to appreciate RMB and explained why it would not help to reduce China’s trade surplus but to make the situation worse. Through the review of the yuan/dollar rate history between 1995 and 2009, he stated that the fixed exchange rate between 1995 and 2004 helped China to gain the price-level stabilization while the “one-way-bet” RMB appreciation pressured by the U.S. from July 2005 to July 2008 led to unfavorable results such as hot money inflows, loss of monetary controls and the disruption of the forward exchange market. Since the unexpected dollar appreciation in July 2008 due to the financial crisis, China’s suspension of RMB appreciation “stops the hot money flows, makes PBC regain monetary control” but meanwhile endured great appreciation pressures from America who aimed to achieve the net trade balance goal.
However, Professor McKinnon stated that a discrete appreciation of the RMB against the dollar needed not reduce China’s trade surplus or America’s trade deficit, for the huge trade imbalance between China and the US was not of an exchange rate question but the results of another two causes: “surplus” saving in China, which means the personal disposable income declines and consumption is limited; and an even bigger net saving deficiency in the US. So he concluded that fiscal expansion in surplus-saving countries like China was the real key to reducing the trade surplus. Since fiscal expansion was most effective when the exchange rate was stable, the appreciation of RMB would not reduce the trade surplus.
Rakesh Mohan analyzed the emerging contours of regulation of financial institutions with an emphasis on the emerging challenges and dynamics. He first provided a broad overview of global development which contributed to the current global financial crisis. He stressed that among a variety of factors that caused the financial crisis, long periods of excessively loose monetary policy in the major advanced economies played a fundamental role. And then he analyzed the shortcomings in financial regulation and supervision and how they worked together to induce the crisis. Based on the analysis, he finally provided proposals for reforming the regulatory framework in the future and discussed the challenges in implementing the regulatory proposals.
The other two professors had a closer look on what had happened to the rural labors in China. Jean C. Oi, William Haas Professor in Chinese Politics and Professor of Political Science, discussed China’s distinctive responses to the world economic crisis, which were called by her as “China’s Development Model.” She noticed China’s ability to weather the crisis, for example the state assistance to returned migrants including payback wages, retraining programs and starting small business. The immediate responses of the government and other institutions have greatly mitigated the impact of the crisis. Professor Scott Rozelle examined the impact of Financial Crisis on China’s rural economy and how people have been suffering from it.
The session aroused great interest and intensive discussions among the participants and the panel ended successfully.
Edited by: Andrew Yang