China Financial Daily

What course to follow for China during the financial crisis?
From 1788, the British had the first economic crisis of overproduction to the 2008, during two hundred years, the capitalist world total of 28 times occurred in this economic crisis of overproduction. Of these, 1825 had occurred 6 times before, that is, in 1788,1793,1797, 1810, 1815, 1819 crisis, as occurred in the United Kingdom, and the frequency of crises irregular intervals for up to 13 years, the shortest 4 years, so it should be a partial, local overproduction of economic crisis, an early form of capitalist crisis, were not called a typical capitalist economy. From 1829 to 1929 hundred years time, 13 occurred in the capitalist world economic crisis, 1825,1836,1847,1857,1866,1873,1882,1890,1900,1907,1914,1921,1929 during this period of crisis is basically a state in the spontaneous periodic occurrence of development, not only the frequency is relatively regular, and universal and worldwide, showing a gradually increasing trend. The crisis of capitalism in this period are typical of the period in the form of free competition. From 1937 to 2008 crisis, the crisis compared with the previous period, this period of crisis and the emergence of new changes. 80 years from the 20th century began to take as long as possible because the Government’s policy of less intervention in the economy, not only the frequency of the crisis once again restored to the decade or so, the crisis intensified in degree, and Tu Chu’s Biaoxian for the periodic financial crisis, a crisis tend to the same period of high.

Over the past two decades, the world’s overall political and economic stability, economic globalization and the spread of a geometric multiple of 124 countries in 2006 and 2007 the economic growth of more than 4%. While Europe and the United States over-consumption, excessive saving in Asia, but several in Asia over 10 trillion dollar savings back is considered the safest investment destination – the United States. So over the credit and run Oh, expansion began to multiply until the disaster.
At this time, Dr. Kissinger said they thought the sentence, and we globalization of our markets, but not our political and global governance.
It is this contradiction between the two was a result of today’s global economic plight. Localization of the political constraints of globalization not only can not manage the economy, or even disrupt the process of globalization.
Now the international institutions and international organizations, from the Bretton Woods system, IMF, WTO, World Bank, the United Nations, were still in the old era was born, and not the times for today’s globalization of practical solutions program.
In this new world, China will play what role? Most likely to lead the country in the world economic recession is considered to China and the United States, China and the U.S. pattern of the so-called G2, is able to save the economic crisis?

The status of the economic crisis:
1, United States
A, total U.S. consumption share of GDP was 73% growth in U.S. consumption growth in GDP, the contribution rate is 88%, so the U.S. is the consumer, but when U.S. consumption come from? He mainly relies on credit, from the macro level, the deficit through imports and exports through the Government’s bond financing to solve, so household savings is negative, resulting in a trade deficit and the Government’s high-volume loans. Bank of China Vice President Zhu Min, that this pattern can not be sustained, housing financing impossible again, 500 billion has gone, the U.S. global spending in 2008 is 10 trillion, then fallen by 10,000 billion dollars, he net importers of trade deficit in 2008 was 700 billion U.S. dollars, this probably reduced in 2009 to 2,000 billion U.S. dollars, so he has to reduce the more than 5000 billion dollars in external demand, the China Ye Hao, on the Germany, Japan, Korea, effects are great. So, obviously this pattern can not be maintained.
B, demographic changes facing the United States, baby boomers enter the peak at 2008 points, started to go down. Post-war baby boomers throughout the United States to promote investment and consumption of the most important point, so the baby boomers go down, then U.S. consumption and the savings will go down, the United States suffered financial losses as big banks began to Squeeze, do not provide more financial loans to residents to do consumer credit.
Baby Boomers (baby boom), refers to a specific region in a given period and the birth rate greatly enhance the phenomenon, the word first appeared, mainly refers to the United States after World War II, “4664″ Phenomenon – 1946 to 1964, the 18 years up to 7800 million population of baby boomers.
C. Former U.S. Treasury Secretary Henry Paulson insisted the Bush administration’s weak dollar, resulting in excessive growth of real estate and commodities, to the summer of 2007 a crisis, Paulson still believes that the weak dollar to improve the U.S. trade situation, even if the trade situation Farewell, uphold the weak dollar will cause through the expansion of domestic economic distortions.
Weak U.S. dollar: U.S. dollar and other major currencies continued to fall, and no signs of recovery.
Forbes president and CEO, Steve. Forbes said: When a crisis comes, the market price valuation Paulson accounting principles, resulting in deterioration of bank finance. If there is no market, reflect the true value of assets not come out, then continue to lower asset prices is of no use, especially in loan repayment of principal and interest are especially the case, only to let the banks even more reluctant to lend, Bank loans are meant for each to reduce their capital, this time undermine the entire financial system.
In addition, Paulson saved Bear Stearns, while allowing Lehman Brothers, Bear Stearns does not change the trend of economic decline.
China’s solution
① 4 trillion of investment – China’s “package”
Package: refers to a variety of food selection in the difference or monopolize all. In response to the financial crisis, Premier Wen Jiabao summed up China’s Davos forum, the package for five. First, the expansion of domestic demand, a massive increase in revenue. Second, the restructuring and revitalization of industry. Third, vigorously promote the transformation. Fourth, establish a relatively sound social security system. Fifth, maintain the financial stability to support the economy.
Bank of China Vice President Zhu Min said: “the current policy is we use a large investment in alternative outlet Duiying economic growth, the same time, policies to encourage consumption, hoping for a more balanced consumption and investment.”
China’s financial, do not leveraged the whole of China, the Chinese overall debt is low, residents of GDP, total debt was 20%, China’s fiscal 2007, only 7% of the surplus countries,

② further adjust fiscal policy
1, expanding public investment, focus on strengthening key areas. Mainly used for agriculture and rural infrastructure, livelihood projects for construction of affordable housing, education, health care and other social undertakings in the construction, earthquake reconstruction during the energy saving and ecological construction, support enterprises in independent innovation, technological innovation and service development, railways, highways, airports and ports and other infrastructure.
Second, to promote tax reform, the implementation of structural tax cuts, reduce the tax burden on businesses and residents, and expand business investment, enhancing consumer capacity, the full implementation of consumer value-added tax, reduce corporate taxes, promote enterprises to increase self-creation and transformation of input.
Implementation of the refined oil tax reform, fair tax burden, promote energy conservation and emission reduction, cancellation and suspension of 100 items of administrative fees, continue to implement the personal income tax payroll deduction of cost standards, increase export tax rebate rate of some products, cancellations and reduce tariffs on some exports, reduce the stock trading stamp tax, and the implementation of unilateral imposition can be exempt savings deposits and securities transactions settlement funds on interest income, lower housing transaction taxes and a series of tax cuts.
Third, improve the income of low-income people, vigorously promote consumer demand.
Fourth, to further optimize the spending structure, protecting and improving people’s livelihood. To increase subsidies to farmers to support agricultural production and accelerating the construction of public utilities in rural areas, promote rural reform and development, efforts to protect and improve the lives of rural people. To increase the education, health care, social security, employment, affordable housing, investment and cultural fields, while strictly control spending, further reducing administrative costs.
5, support technological innovation and energy savings, promote economic structural adjustment and development pattern, and more investments in technology, enterprises accelerate the technological transformation and progress. To steadily system of paid use of resources and ecological environment compensation mechanism for reform.
Sixth, encourage consumption
Improve the average worker, the wage levels of migrant workers to improve their spending power, on the short-term economic growth and long-term structural adjustments and changes, are of great importance.
③ reconstruct the world monetary system
Framework of existing international monetary system has been unable to maintain such a complex process of globalization and financial. In 1971, the U.S. dollar and gold link, signed an “Agreement of Jamaica,” This agreement is basically pegged to the dollar the world currency and the dollar and gold hook, so it took all of the world’s financial basis points linked to the dollar this a footing. At that time the whole financial market is limited, walk the entire U.S. economy is stable, this system is maintained. When the financial system, getting faster and faster, the size reached 500 trillion, 10 times world GDP, the current U.S. economy, the financial bubble is so big, so the issue of money, of course not, of course, this system can not maintain
④ to promote confidence in the economy
⑤ the use of new technology for sustainable economic development

Prospects for future development
Achieve a low carbon economy, the concept of a low carbon economy based on the UK published in 2003, “Energy White Paper” The overall objective of which is 2050 carbon dioxide emissions in 1990 based on the reduction of 60%, essentially the United Kingdom country into a low carbon economy. Britain is the world’s first industrialized country, is the global emissions reduction the main driving force. The concept of a carpet made the economy on the international community’s attention and lead to a low carbon world economy, the trend of economic development
UK Energy White Paper, Our Energy Future-Creating a Low Carbon Economy, Feb.2003
The concept is a low carbon economy in the “Kyoto Protocol” unprecedented setbacks suffered by the British situation, love is made prime purpose is to break the deadlock in international climate negotiations, focusing on international climate system. While a low carbon economy the UK, but did not give a measure of the carpet system of criteria and indicators for the economy. Address climate change, achieve economic development in the carpet is the ultimate way to cut off economic growth and the link between greenhouse gas emissions. The international community usually “decoupling” indicators to reflect economic growth and material consumption changes are not synchronized in real terms. The purpose of the establishment of decoupling indicators of a country to climate change and test the effectiveness of policies and seek to connect with the potential impact of decoupling factor. Decoupling as appropriate basis for policy. If carbon dioxide emissions and GDP growth rate showed no parallel phenomenon, then separated into the economic system produces the phenomenon. If the economic growth rate higher than the growth rate of carbon dioxide emissions, a relative decoupling (as opposed to low-carbon economy), if the economic driving force in showing steady growth, however, reduced carbon dioxide emission rate, is called an absolute decoupling (the absolute low-carbon economy ).
In the long term, a country (or region) the process of transformation to a low carbon economy, that is, greenhouse gas emissions and economic growth continued the process of decoupling.
The driving force to promote a low carbon economy has three aspects. First, industrial upgrading, mainly from farming before the industrial age to the energy-intensive industry-led industrialization, to services and technology industry-based post-industrial society. This is the economic and industrial development of the rule. The reason why many developed countries currently in economic development and greenhouse gas emissions economy decoupling stage, largely because they have entered the post-industrial era.
Second, energy security, in today’s world economy is characterized by a large oil and other heavy dependence on fossil fuels, while the current high oil prices running of the world economy faces great challenges, is bound to save energy and develop alternative energy sources, ultimately Fazhan low-carbon economy to rid the world of high dependence on fossil energy.
Third, global warming, as climate change has become an established fact of science, the international community’s concern about climate change, increasing international climate regime of the talks to make to move forward in building the world’s nations to address global warming, the economic carpet of Consensus has also been strengthened.
China is becoming a “world factory”, the scale of investment in the history of the world is unprecedented. The essence of a low carbon economy with high energy efficiency and clean energy the structure of the core is the energy technology innovation and system innovation. ① For China, is not required to reduce the use of fossil fuels such as coal, but its best to improve China’s energy efficiency is the unit of GDP, “carbon consumption,” gradually reduce, and the development of new energy and new equipment. ② China’s use of available renewable energy sources (wind, small hydro, solar and biomass, etc.) is great potential for power generation. For example, compared with gas-fired combined cycle power plant, construction of wind farms have been technically and economically into a large-scale development phase. However, nuclear power and renewable energy development and utilization to achieve a certain scale, will contribute to the stability and carbon dioxide emission reductions. Only take one of the low carbon measures, primary energy consumption and carbon dioxide emissions can not significantly reduced. ③ reduce energy demand. With China’s industrialization and urbanization process, in-depth, and economic and social development, China will continue in the short term upward trend in total energy demand. However, China must reduce energy intensity of economic development, changing energy-intensive low-income economy. Same time, through the implementation of energy efficiency standards, promotion of energy-saving technologies and to guide lifestyle changes, new energy demand in China has been effectively controlled. through technological advances and new technologies, can promote the development of China’s industrial value-added to high-tech. High-tech research and development (such as computer and information industry) induced promotion of high technology in other areas to improve the productivity of other industries and competitiveness have a very large role in promoting. China not only needs to develop advanced low-carbon technologies, but also to focus on technological innovation and low carbon technology applications in other industries, in order to achieve low-carbon of the entire national economy.