Launch of the IMF Global Financial Stability Report 2019
2019-11-06 IMI
In the opening speech, Professor Tu Yonghong said that the IMI, as a long-term partner of the IMF, regularly releases joint research reports in the field of international economy and finance, and is committed to the research and discussion of international macroeconomics, monetary and financial strategies. According to Professor Tu, IMI has cultivated international financial and diplomatic talents who shoulder the mission of the times and contribute to the development of the global financial industry. She sincerely thanked all parties for the support for IMI.
Fabio M. Natalucci first pointed out in his speech that in the context of increasing global economic downside risks, the Federal Reserve and central banks have begun to implement loose monetary policies, and this situation will persist for a long time. The "Global Financial Stability Report" pointed out three weaknesses in the current global financial market, which would amplify economic shocks and increase financial risks. The first is the intensification of corporate liabilities and the increase in risk at the financing level; the second is that institutional investors tend to hold assets with higher risks and poorer liquidity, such as bonds at grade B or below; market economies have become increasingly dependent on external debt. In general, he believes that global financial vulnerability is at a high level, and the occurrence of a black swan incident may have a significant negative impact, but this does not mean that the global economy will decline. He then pointed out that in this context, institutional investors also need to strengthen supervision and disclosure of assets and liabilities. Financial conditions in emerging markets are favorable, but their external liabilities are growing rapidly, and there are risks in the long run, and they should be treated with caution. At the same time, policy makers should also strengthen supervision and carry out their work more cautiously. To prevent sudden outbreaks of crisis in weak links, it is not suggested to immediately tighten monetary policy to prevent sudden outbreaks of crisis in weak links.
Vice President Wu Xiaoqiu pointed out in his speech that the global financial market is currently in an era of high uncertainty. First, the world has entered an era of low interest rates; second, long-term government bond yields are lower than short-term government bond yields; third, the price of gold continues to rise; fourth, people tend to reserve cash rather than allocate financial assets; fifth, financial asset prices in the US continue to rise, and the Dow Jones index equity assets registered several records. China's current degree of financial openness is still relatively low, foreign investors' investment in China's capital market accounts for only 2%, and RMB has not yet fully realized free trade. The current opening path is mainly about allowing foreign financial institutions to enter the Chinese market. In the process of increasing financial openness in the future, we must continue to promote China's financial reform and take the following measures: First, we must unswervingly follow the path of a socialist market economy, truly understand the modern market economy, demonstrate full competition and increase the degree of marketization of the economy; second, it is imperative to further improve China ’s rule of law foundation, especially in terms of intellectual property protection and property protection; third, we must improve the transparency and continuity of policies, and to strengthen the foundation of China's financial opening. Finally, he expressed his optimism about China's financial opening-up.
In Wei Benhua’s speech, he started with the key idea that the current financial environment was relatively stable with a low interest rate, but there were three risks, namely excessive corporate debts, investment in risk assets and solvency of foreign debts. The Report had it that two factors were playing a vital role. First, global economic slowdown. The Quantitative Easing policies published by the Federal Reserve since the 2018 crisis impacted other nations’ policies, resulting in a low ROI across the globe. When the Federal Reserve injected more liquidity into the market, China also adopted more targeted monetary policies to adjust the market and to monitor the financial institutions. Second, intensified trade tension. America should lodge a complaint with WTO instead of imposing unilateral sanction against China. China would prefer to reaching cooperation through negotiation to avoid negative influence on global economy. There were still a series of problems in China's financial system and China would deepen reform and opening up in the future. China's current development situation was different from that of developed countries, thus more targeted policies would be necessary. As for the foreign debts of the emerging market, Wei Benhua pointed out that China's Belt and Road Initiative was a win-win strategy. When China invested in infrastructure construction abroad, the host countries should also properly treat the rising of foreign debts. Finally, Wei Benhua stressed the consistency of economic and financial policies and the importance of financial supervision. China needed to deepen reform to improve the openness of its financial system and to further introduce foreign capital.
In Professor Zhao Xijun’s speech, he pointed out that after the 2008 financial crisis, consensus had been reached on the philosophy and measures of stabilizing global finance, such as the establishment of systematic risk and macro-prudential regulation framework made by the Financial Stability Board, new regulatory requirements on systematically important institutions made by Basel Ⅲ and macro-prudential management system established by central banks and regulatory authorities. However, the current stability was challenged by various non-traditional factors: the dramatic fluctuation of Dow Jones Index and Shanghai composite index, frequent and large swings in American market caused by Trump’s Tweets, fluctuation of gold and Bitcoin prices, etc. All these required us to consider whether the financial-regulation-centered systematic risk management framework would be able to prevent the instability caused by “macro” financial risks and financial market risks. He also mentioned some new perspectives on financial stability: first, the Baoshang Bank and Jinzhou Bank incidents alerted us the influence of the relationship between non-systematically important financial institutions; second, the impact of information represented by China-US trade friction, Trump’s Tweets and Brexit; third, the possible influence of the fluctuating price of legal tender brought by digital legal tender; fourth, the conservative tendency of global investors’ appetite for risk.
