Macro-Finance Salon (No. 116): Initial Estimation and Policy Discussion on China’s Financial Cycle

Macro-Finance Salon (No.116) was held on the afternoon of March 28th at Renmin University of China. Dr. Zhu Taihui, Senior Research Fellow of National Institution for Finance and Development and Head of the Editorial Office of Financial Regulation Research, delivered a speech titled “Initial Estimation and Policy Discussion on China’s Financial Cycle”. Participants include Ma Yong, Professor of School of Finance, RUC, and IMI Research Fellows Peng Yuchao, Tian Xinming, Lin Nan and Xiu Jing. The Salon was chaired by Bian Weihong, Division Head of International Finance Institute, Bank of China. Dr. Zhu Taihui studied China’s financial cycle from five perspectives. In the speech, he first analyzed two major difficulties facing China’s financial system and policy against the backdrop of recent economic transformation and increasing downward pressure. On one hand, high-level departments should devote more efforts to serving the real economy, and undertake the task to enable a rapid yet steady development of economic transformation. And on the other hand, China faces intense risk prevention pressure. Given that, Dr. Zhu pointed out a starting point—figuring out the way to cope with the two difficulties based on China’s financial cycle and an initial estimation. Second, Dr. Zhu shared his views on the implication and basis of financial crises, how to adjust the financial cycle from the perspectives of indicators and estimate method, as well as the result and features of the adjustment. Third, Dr. Zhu talked about the lessons this study could give to China’s current macro control policy. He put forward suggestions on how to integrate financial cycle and the regulation framework of monetary policy, and shared his views on whether the estimation could be the standard and supporting point to coordinate monetary and macro prudential policies. At last, Dr. Zhu talked about the research prospect of adjusting the financial cycle. After the speech, guests started their discussions on the relationship between finance and the real economy, definition of the financial cycle, financial regulation, the relationship between currency and credit, and how would the financial cycle impact micro economy.

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