SMM News: on Saturday, May 25, the 2019 Tsinghua Wudaokou Global Financial Forum, "Financial supply-side Reform and opening up," hosted by Tsinghua University, was held in Beijing for two days. Guo Shuqing, chairman of the CBRC, who had planned to attend, was absent from the forum because of a temporary emergency.

At the meeting, Guo Shuqing appointed the Chief risk Officer and Chief of staff of the China Bank Insurance Regulatory Commission, and press spokesman Xiao Yuanyuan to read the speech on his behalf. Guo Shuqing said in his speech that China's economic fundamentals determine that it is impossible for the RMB to continue to depreciate, and speculating against the RMB is bound to suffer huge losses.

At the Tsinghua Wudaokou Financial Forum, Xiao Yuan read the speech on behalf of Guo Shuqing.

Guo Shuqing also pointed out in his speech that while opening up finance, the contagion and complexity of risks will also increase. For such a large developing country as ours, it is particularly important to prevent and control financial risks. We should be particularly vigilant against the large inflow and outflow of overseas funds and the speculation of hot money, and resolutely avoid excessive bubbles in real estate and financial assets.

The following is the full text of Guo Shuqing's speech (according to the guest's on-the-spot speech, which has not been reviewed by me):

First, the escalation of trade frictions by the United States will not solve any problems.

On May 10th the US government imposed tariffs on $200 billion of Chinese exports to the United States, followed by a ban on Huawei and other companies, and announced a countervailing investigation into the yuan's exchange rate. The Chinese government, enterprises and people are not surprised by this. We continue to believe that a trade war will not solve any problems at the expense of others and harm the world.

From China's point of view, the United States can raise tariffs to the limit, but the impact on the Chinese economy will be very limited. First, the vast majority of products exported to the United States are well suited for domestic sales, and China is in a period of escalating consumption, and the rapidly expanding market will digest a large part of it without having a "crowding out effect" on existing consumers. Second, great progress has been made in market diversification, the "Belt and Road Initiative" initiative is seeing results, and markets outside the United States welcome more Chinese products. Third, a considerable number of them will also be exported to the United States, either because alternatives are not available or because American importers are willing to share the cost of imposing tariffs. Fourth, the adjustment and upgrading of China's industrial structure requires a certain proportion of production to be transferred overseas, which will speed up China's high-quality development. Fifth, China's financial markets were overaffected last year and are now significantly more resilient, and the scale of further shocks will not be too large.

From the point of view of the United States, it will be hit by almost the same intensity, exports to China will shrink, the interests of American enterprises will be hurt, the incomes of some high-tech companies will fall, and American consumers and importers will pay very high costs. Low-and middle-income groups, especially farmers and blue-collar workers, actually lose more benefits. The United States has huge overseas assets and liabilities and is more dependent on the dollar-dominated international financial system than any other country. Trade wars are bound to cause shocks and downturns in the international financial market.

Logically, the goal of the United States is to reduce the trade deficit between the United States and China, but because of China's reaction, its direct results are very uncertain, coupled with other factors are likely to have little effect, or even counterproductive. First, adding Chinese high-tech companies to the sanctions list and explicitly banning US companies from selling products and technology is tantamount to directly increasing the deficit. Second, the launch of a trade war shocked international financial markets, the RMB exchange rate fell rapidly, and the US government immediately worried that the role of tariffs would be offset. Third, a sharp increase in tariffs would push up prices. Fourth, to curb China's exports to the United States, the gap must be made up by the products of other economies, and the total deficit cannot be reduced. Historically, the United States has had trade disputes with other late-developing countries and emerging economies for more than 40 years. In 2000, China overtook Japan as the biggest contrarian country. India, Vietnam, Indonesia, the Philippines, Bangladesh and other countries have a good momentum of growth and are accelerating to promote and change the pattern of world trade in goods and services, and the US deficit will not be reduced.

Second, the United States has in fact benefited greatly from the trade deficit with China.

Judging from the statistics alone, the United States has a large trade deficit with China, which seems to be at a loss, but a careful analysis shows that the United States has actually benefited greatly from many aspects. The benefits to the United States from Sino-US economic and trade exchanges are equivalent to peeling off many skins from a cow.

First, importers and multinational corporations in the United States make the vast majority of their profits from the trade balance. Nearly 60 percent of the US trade deficit with China comes from foreign-invested enterprises, a considerable number of which are US-funded enterprises. The sale of these products ultimately results in the revenue and profits of American companies. 1/3 of the increase in global overseas sales by US-funded companies came from the Chinese market. 61% of the trade imbalance between China and the United States comes from processing trade, and China really gets very little value added in the distribution of real value.

Second, American consumers obtain huge "consumer surplus" through Sino-US trade. According to statistics, about 1/4 of retail goods in the US market are imported from China. For example, 26 per cent of the products sold by Wal-Mart come directly from China. Chinese products of good quality and low price have been imported into the United States, which has reduced the cost of living of American families and improved the level of welfare.

Third, the products and services exported by the United States to China are areas in which China gives full play to price support. For example, the prices of commodities such as food, energy, aircraft and chips would by no means be where they are today without China's heavy purchases.

Fourth, since the 1990s, the United States has experienced the miracle of "high consumption and low inflation." one of the important reasons is that China, with a population larger than that of Europe, the United States and Japan combined, has increased the global supply of consumer goods.

Fifth, the United States has received a return of cheap capital. The capital accumulated by China's trade surplus supports US consumption and investment in the form of assets that buy US Treasuries. By the end of last year, China had US $7.3 trillion in assets, more than half of which existed in US dollars, making the cost of capital in the US market extremely low and creating extremely favorable conditions for economic recovery and prosperity.

Sixth, the United States has long occupied China's huge savings resources. The Chinese people are industrious and thrifty, saving a little money even when they earn a few dozen dollars and dozens of dollars a month. China's national savings rate has been at a high level. The huge current account deficit between the United States and China means that direct financing accounts for a high proportion of the US financial system and the deposit creation effect is low in the US financial system of the same size. The slow growth of broad money and cash in the US, in sharp contrast to the 1970s and 1980s, is enough to explain the new secrets of the US economy and finance: the US has even saved a lot in the cost of printing and issuing dollars.

Third, accusing "China of stealing American technology" is the logic of modern power.

China began to introduce foreign capital 40 years ago, and foreign investors have benefited greatly from China. The actual use of foreign capital is about 2 trillion US dollars, of which the United States has invested 80 billion US dollars in China. The assets currently formed are $150 billion. These are based on the mutual benefit of enterprises, and none of the project contracts have been forced by the Chinese government to sign by foreign parties. Now the United States suddenly accuses Chinese law of "compulsory acquisition of foreign intellectual property rights." Even using the word "theft" is an insult to the Chinese people.

China has been ahead of the world in science and technology for more than ten centuries in history, and our intangible assets have made unparalleled contributions to the evolution of human civilization. The well-known "four great inventions" directly contributed to the rise of capitalism in Europe. Without gunpowder, compass and printing, there would be no America today. Now that China is a late-developing country, there is certainly nothing wrong with learning advanced western technology.

Looking back at the history, we can see that in the period of industrialization in Europe and the United States, technological imitation and plagiarism among countries were once very common, and some enterprises did whatever it took to obtain advanced technology, which was the product of a specific stage of development. Every developed country has gone through the process of standardizing the protection of intellectual property rights, but each country has made new breakthroughs and made new contributions to technological progress through its own painstaking exploration on the basis of its predecessors. And, to be sure, the modernization of the United States and other countries is not achieved by theft, but by the hard work and hard work of their own people.

Market for technology, or technology for market, was originally invented by western countries, and transactions based on the principle of fairness are recognized by the market. The United States, which has long touted free trade and claims to transfer technology to developing countries, now seems to have no desire to deliver on its promises.

Developed countries have been making huge profits through technology transfer, and through patent franchising and other means, many of the science and technology in developed countries have made high profits in the application of science and technology in developing countries. Some of the profits have become a new research and development capital, so that the technological progress of developed countries has formed a virtuous circle. In addition, the application of many technologies in developing countries has been tested, and the technicians of these countries have made great contributions to the improvement and improvement of technology, which has promoted the further upgrading of the technological level of developed countries.

In the name of intellectual property protection, the United States has carried out trade protection in the name of intellectual property protection, and its accusations against China are completely unfounded. Today, China has become a staunch defender and active builder of international rules on intellectual property rights. Francis Gao Rui, director-general of the World intellectual property Organization, praised "China has become a model for the creation and protection of intellectual property rights." Only a few years ago, the US government, institutions and dignitaries publicly affirmed that great progress had been made in the protection of intellectual property rights in China. Did all this change overnight?

History has long proved and will continue to prove that sanctions and blockades not only cannot stop a country's scientific, technological and economic development, but will stimulate its determination to develop its own research and development and accelerate its technological progress. In the 1950s and 1960s, we were blocked and embargoed by all parties, and in the very difficult environment of poverty, we still created "two bombs and one satellite," and China gradually became one of the major scientific and technological powers in the world.

IV. Continue to deepen the reform of the RMB exchange rate formation mechanism

The CPC Central Committee and the State Council have decided to continue to deepen the reform of the RMB exchange rate formation mechanism, enhance the flexibility of the exchange rate, and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level. In recent years, the RMB basket exchange rate has been stable in the global currency, and the Chinese government's efforts to strike a balance between improving exchange rate flexibility and maintaining exchange rate stability have been widely recognized by the international community.

Since the early 1990s, the US has repeatedly threatened China with allegations of "currency manipulation". According to the current definition of the US Treasury, exchange rate manipulation needs to meet three quantitative criteria at the same time: 1) the trade surplus with the United States exceeds $20 billion a year; 2) the current account surplus accounts for 3% of GDP; 3) the amount of foreign exchange purchased through exchange rate intervention exceeds 2 per cent of GDP. China's current account surplus accounted for only 0.37% of GDP in 2018, did not buy foreign exchange in large quantities, and did not rely on exchange rate depreciation to gain a competitive advantage in trade. It is difficult for the US government to put this hat on China.

Over the past decade, any significant devaluation of the renminbi has been largely due to external reasons rather than on purpose. The most recent was in May, when the offshore yuan fell by more than 3% against the dollar, as a result of escalating trade frictions in the United States and affecting market sentiment. For a long time, developed countries have been asking the RMB to enhance the flexibility of the exchange rate, but when the degree of marketization and fluctuation of the RMB exchange rate price has increased, some countries have shown the attitude of Ye Gong. It is clearly ludicrous to accuse us of unfounded suspicion.

It should be pointed out that despite the recent fluctuations in the foreign exchange market, Chinese enterprises and residents have not experienced any panic, and more people realize that it is unrealistic to obtain investment returns from buying and selling foreign exchange. It is also unsafe to transfer financial assets overseas. In mature market countries, few enterprises and residents rely exclusively on foreign exchange speculation for investment returns. Although the so-called "Mrs. Watanabe" has appeared in Japan, the actual results are not the same as the legends of that year.

The short-term fluctuation of RMB exchange rate is normal, but in the long run, China's economic fundamentals determine that it is impossible for the RMB to depreciate continuously. China is still the largest engine of world economic growth, with excellent market space and growth potential. With the improvement of the quality of economic development, the RMB market exchange rate will continue to approach PPP, speculation against the RMB is bound to suffer huge losses.

5. There is no so-called state monopoly capitalism in China.

In recent years, there is an international view that the rapid development of China's economy is the result of the implementation of "state monopoly capitalism", which is groundless.

In fact, China's economic composition has become increasingly diversified, and the market share of state-owned enterprises has been declining. In addition to the government's economic activities, the state-owned economy accounts for less than 40% of the GDP, and many of the state-owned enterprises are also listed at home and abroad. In fact, they are joint-stock enterprises, and 100% of the pure state-owned enterprises are already very few. In large state-owned enterprises, a large number of subsidiary control rights have been ceded to private enterprises, even the central state-owned enterprises, are also in competition with each other. When military enterprises were reformed more than 20 years ago, each industry was divided into more than two companies.

At present, private and foreign investment can enter almost all industries and all fields without any restrictions and barriers. Whether it is rail transit, equipment manufacturing, energy and raw materials, we can see the sound and shadow of enterprises under different ownership. We adhere to the principle of competitive neutrality, emphasize equal treatment and equal treatment of all kinds of market entities, and encourage them to compete and cooperate to achieve a win-win situation in which their advantages complement each other. China's industrial policy and credit policy are guiding, not instructive. The landing of various policies should adhere to the principles of marketization and legalization. The issuance of this guiding policy is also a common method adopted by various countries, such as the "export doubling plan" of the United States, the "industrial recovery strategy" of the European Union, and so on.

The financial industry has also formed a diversified pattern, China's financial institutions have both state-owned and private foreign ownership, listed institutions and rural credit cooperatives as well as natural persons to participate in shares. At present, among the 4588 banking institutions in China, more than 3000 are controlled by private institutions, and most of the Chinese insurance companies are privately owned, and most of the securities companies and fund companies are privately owned. Even the big five banks, social equity accounts for an average of 30%, some even more than 40%. In particular, it should be pointed out that the market share of China's top five banks is now only 37%, which is very close to that of the top five banks in countries such as Britain and the United States.

Another typical example is financial technology, which is developing rapidly in China, should be extensive, and is in a leading position in the world. The very important reason is that the government has adopted a prudent and inclusive attitude towards private Internet enterprises, creating a level playing field. The large state-controlled banks have adopted the attitude of competition and cooperation from the very beginning. For example, more than ten years ago, Alipay was born, grew and grew under the payment cooperation of the Construction Bank. Today, all financial technology companies have formed partnerships with large and medium-sized banks, and other banks have also made great efforts to develop financial technology. And technology companies in fund-raising, account opening, payment and settlement, inclusive finance and other aspects of all-round cooperation, learning from each other to make up for each other, the effect is very remarkable.

Sixth, the goal of improving the corporate governance structure will not change.

In recent years, some foreign institutions and organizations have had a lot of doubts about the corporate governance of Chinese enterprises, especially the role of party organizations. Private enterprises in China have been operating independently and effectively according to the principle of marketization according to the articles of association and organizational structure, and the party organizations have not directly intervened.

The leadership of the Party has always played a core role in state-owned enterprises, and integrating the leadership of the Party into all aspects of corporate governance is the most distinct feature of our corporate governance model. General Secretary Xi Jinping stressed that adhering to the party's leadership over state-owned enterprises is a major political principle and must be consistent; the establishment of a modern enterprise system is the direction of state-owned enterprise reform and must be consistent. To deepen the reform of state-owned enterprises, we must not only optimize and improve corporate governance, but also give better play to the role of party organizations, so that the two organically integrate and promote each other.

From the perspective of global theoretical research and practical exploration, there is no unified standard model of corporate governance, and there is no optimal model that can be copied completely. Chinese enterprises are consistent with international general standards in the principles and framework of corporate governance. The G20 Hangzhou Summit held in China in 2016 made it clear in the communiqu é that it supported the corporate governance principles advocated by the G20 / OECD. Under the framework of the general principles, in practice to adapt to specific national conditions to carry out some supplement and improvement, in line with international practice.

The establishment of a modern enterprise system is fully compatible with adhering to the leadership of the Party. First, in the scientific and effective checks and balances mechanism, to promote the general meeting of shareholders, the board of directors, management, the board of supervisors in place, each in its place, each to give full play to their roles. The main purpose of the party committee is to implement the direction, manage the overall situation, and ensure implementation, and play a leading role in implementing national laws, cultivating a healthy corporate culture, and assuming social responsibility, and the management decision is still the responsibility of the board of directors. Second, in the protection of stakeholders, good corporate governance should fully take care of the legitimate rights and interests of shareholders, employees, customers, communities, creditors and the upper and lower reaches of the supply chain. Our party always adheres to the fundamental purpose of serving the people, has rich mass work experience and good organizational mobilization ability, and can better safeguard and develop the legitimate rights and interests of all parties. Third, the leadership of the Party has unique advantages in corporate governance. For example, party organizations adhere to collective leadership and command, and members of the party committee, board of directors, and board of supervisors also hold cross posts, which can better prevent insider control, manipulation of major shareholders, inadequate performance of directors, and non-independence of independent directors.

Practice has proved that the corporate governance model with Chinese characteristics is completely feasible. For example, the core operations of the party committees of the five major banks that established diplomatic relations between workers and farmers have been brought into full play. Through a series of major measures, such as joint-stock reform, the introduction of strategic investors and listing at home and abroad, historic breakthroughs have been made in corporate governance and business performance. Some banks won the international award of corporate governance more than ten years ago. These banks have been highly internationalized, their networks of shareholders and institutions are spread all over the world, and some key operating indicators, such as labor productivity, rate of return on capital, cost-to-income ratio, capital adequacy ratio and provision coverage, are at the international advanced level. This also fully proves that while learning from international experience, we can successfully explore an excellent corporate governance model with Chinese characteristics.

VII. Unswervingly promoting the opening up of the Financial Industry to the outside World

The opening up of the financial sector is a general trend, and there will be no pause, let alone retrogression. In 2012, China overtook the United States as the world's largest trading nation, accounting for 10.8% and 12.8% of the world's imports and exports in 2018, and more than half of the world's countries regard China as their largest trading partner. Compared with commodity trade, the degree of opening up of China's service industry lags behind. Finance is an important field of service industry. In order to better serve the real economy and the needs of people's life, we must further open up to the outside world.

In 2018, China announced 15 measures for opening up the banking and insurance industries to the outside world, and in May this year, 12 new measures for opening up to the outside world were announced, which are being implemented one after another with good results. There is still a lot of room for opening up in the future. At present, foreign capital accounts for only 2% of China's A-share market, 2.9% of China's bond market, and 1.6% of the assets of foreign banks in all commercial banks. Foreign insurance companies account for 5.8%, and there is still a lot of room for improvement. In particular, we welcome foreign institutions with good market reputation and credit history, with characteristics and expertise in risk control, credit rating, consumer finance, old-age insurance, health insurance, and so on, to enter China and enrich the main body of the market. Innovate financial products and stimulate market vitality.

Of course, with the expansion of financial opening up, the contagion and complexity of financial risks will also increase. For such a large developing country as ours, it is particularly important to prevent and control financial risks. We should be particularly vigilant against the large inflow and outflow of overseas funds and the speculation of "hot money", and resolutely avoid excessive bubbles in real estate and financial assets.

VIII. China's development should be based on its own internal affairs

No external force can dominate China's national destiny, and the Chinese nation must firmly control its destiny in its own hands. The key to whether we can move more steadily lies in doing our own things well, which means that we must first effectively respond to the internal challenges to economic and social development. In particular, there are some outstanding problems, such as aging population, environmental pollution, unreasonable income distribution, uneven regional development and lack of innovation ability.

China's population over 60 years old accounts for 18% of the month. It is estimated that by 2025, the number of people over 60 years old will reach 300 million, becoming a super-elderly country. The accelerated pace of population aging has a profound impact on all aspects of economy and society. In addition to the reduction of the working population and the reduction of the savings rate, which is not conducive to long-term economic development, China's pension, medical and social security system will also face severe challenges.

China's environmental pollution is still very serious, every year due to environmental pollution and ecological damage caused by economic losses as high as trillions of yuan. The CPC Central Committee with Comrade Xi Jinping at the core attaches great importance to ecological and environmental protection, and the General Secretary has repeatedly stressed that Green Water and Green Mountain is Jinshan Silver Mountain. Although the cost of pollution control has become high, but involving the interests of the people of the whole country, and so on can not be slow. We must make comprehensive use of economic, legal and administrative means to keep an eye on the focus of the problem and resolutely fight a tough battle for the prevention and control of pollution.

Unreasonable income distribution is also a prominent problem. After the reform and opening up, the income gap between urban and rural industry groups in China has increased, and the distribution pattern is out of balance, resulting in the concentration of social wealth to a small number of people. Although there is still room for improvement in the calculation, our Gini coefficient remains at a high level and we need to attach great importance to it. In addition, there are more than 10 million poor people, and the task of getting rid of poverty is still very arduous.

There are also obvious differences in the development of different regions in China. There is still an obvious imbalance in economic development between the eastern and western, southern and northern regions. In particular, some old industrial and resource cities are facing the heavy pressure of sustainable economic development. To make matters worse, there has been a net decline in the population. If this problem is not solved properly, it will not be conducive to the reasonable adjustment, transformation and upgrading of China's industry, and will not be conducive to improving the level of sustainable development of the national economy as a whole.

The lack of innovation ability seriously restricts the economic development of our country. In recent years, we have paid more and more attention to science and technology education, and the scale of investment has been increasing, but the effect is not ideal. The outstanding problem is that there are still many institutional and mechanism obstacles in education, scientific research and so on. There is a "bottleneck" in the transformation and application of innovative scientific and technological achievements, and there is still a "stuck neck" phenomenon in some core technologies, which seriously restricts the transformation of the economy from high growth to high quality development.

For the above problems, we must adopt a multi-pronged approach, take more measures at the same time, and make great efforts to solve them. The financial sector has made great strides in these areas, and I think this is what financial supply-side structural reform should mean.