Zhang Bin: The core investment in infrastructure should be the metropolitan area to overwhelm the housing prices nearby

Zhang Bin: The core investment in infrastructure should be the metropolitan area to overwhelm the housing prices nearby
Recently, 31 provinces have launched a 40 trillion infrastructure investment plan, and the call for a new round of large-scale infrastructure construction is also rising.”New Infrastructure” was named by high-level officials.On March 4, members of the Standing Committee of the Political Bureau of the Central Committee of the Communist Party of China should choose investment projects, strengthen policy support for land use, energy use, and funds, and accelerate the construction of major projects and infrastructure that have been clearly defined in the national plan.We must increase investment in public health services, emergency supplies, and accelerate the construction of new infrastructure such as 5G networks and data centers.Pay attention to mobilizing the enthusiasm of private investment.Is a new round of large-scale capital construction coming?Zhang Bin, director of the Global Macroeconomic Research Office of the World Economic Research Institute of the Chinese Academy of Social Sciences and a senior official of the China Financial Forty Forum, said in an interview with Sauna.com that the government is unlikely to make another large-scale infrastructure investment.However, the current Chinese economy, especially the problem of insufficient effective demand this year, requires a certain amount of infrastructure investment to maintain stable economic growth.Regarding the recent construction of new infrastructure in the industrial Internet, 5G network, big data and other fields, Zhang Bin believes that many new infrastructures have commercial value, the market itself can be invested, and the government does not need to invest money.”The core of infrastructure investment should be to invest in infrastructure in the metropolitan area, strengthen infrastructure and public service facilities in the metropolitan area, and adjust the land finance to overwhelm the upper and lower housing.”In addition to the direction of infrastructure investment, another key issue of infrastructure investment is the source of funds.Zhang Bin believes that the issue of infrastructure investment financing channels exposed by the “four trillion yuan investment” has not yet been resolved.”The source of funds for infrastructure investment should be resolved through the issue of national bonds, and avoid the old road of local governments seeking commercial financial institutions to borrow money for investment in the stimulus package.Under the impact of the epidemic, SMEs are in a difficult situation.Through certain infrastructure investment, the government can drive the upstream and downstream secondary demand and investment, and indirectly help the small and medium-sized enterprises.”But this process will take some time and more direct measures will be taken to help SMEs that have suffered severe losses in the epidemic.It is recommended that the central government issue 1 as soon as possible.As a special fund, 5 trillion yuan of national debt is used to help small and medium-sized enterprises.Said Zhang Bin.”The government is unlikely to make a new round of large-scale infrastructure investment.” Sauna Night Net: A 40 trillion investment plan recently launched in 31 provinces across the country.What do you think of these phenomena?Zhang Bin: There may be some misunderstandings.Some of these investment plans are previously prepared plans, and many investment plans are not investments to be made this year and year, and may be a very easy investment planning project-and these planning projects need to be approved by the relevant state departments before they can be carried out, The country may not necessarily approve all approvals.Absolutely, the Chinese economy continues to decline, and the impact of the epidemic will definitely bring more pressure on the Chinese economy.In this context, the huge investment plan has aroused heated discussion among the market and the public.But I think the probability of the government making another round of large-scale infrastructure investment is not high.First, under the public opinion environment of the past years, all sectors of the society are highly vigilant about the expansion of stimulus policies, and large-scale stimulus policies are highly controversial; second, the government has long insisted on deleveraging and supply-side reform policies.Inertia; Third, there are now more stringent restrictions on local government borrowing, the central government also has sufficient financing support, and the source of infrastructure funds has not been rationalized.”The current pressure on government debt expansion and infrastructure investment is more urgent.” Sauna Yewang: How much room is there for infrastructure investment, can it bear the banner of steady growth?Zhang Bin: In recent years, China ‘s economy, especially this year, has insufficient effective demand. It is necessary to maintain stable economic growth through government debt expansion and infrastructure investment.The growth of aggregate demand requires the support of credit expansion. Without credit expansion, there is no purchasing power and no demand growth.The enterprise sector used to be the main support for credit growth. The transformation of the economic structure has occurred. Capital-intensive enterprises that require a large amount of capital have entered the period of mature operation from the peak of investment, and the demand for corporate credit has fallen sharply.The proportion of new credits of enterprises excluding local financing platforms decreased from over 50% to less than 20%.The residential sector ‘s loan ceiling with housing mortgage loans as the main body has been growing at a rate of more than 20%. It is a new important force supporting the growth of social credit, but it is still far from enough to maintain social added credit at a reasonable level.The generalized credit of the government and the local financing platform supported by the government, which includes various forms of loans and bond issuance in financial institutions, accounts for 50% of the generalized new credit of the whole society, which is the current growth of generalized credit of the whole societyThe most important support is also the most important support for the growth of purchasing power and demand growth in the whole society.If this part of credit declines substantially, as we saw after the second half of 2018, the income and purchasing power of companies, residents and various government departments will follow a major decline, and the economy will soon face insufficient demand pressure.Under the indicators of spontaneous broad credit expansion in the market and insufficient endogenous market demand, we have to rely on the rational expansion of broad credit in the government sector to invest in higher levels of public services and public infrastructure construction to maintain macroeconomic stability.There is pressure on the government’s broad credit expansion. If there is already inflationary pressure, the government’s broad credit should not be expanded, otherwise it will cause the economy to overheat and also bring expansion effects to other sectors.In the economic environment of insufficient demand and deflation, companies are reluctant to invest. Government investment to provide infrastructure projects with low returns but public property nature will drive demand and investment in the upstream and downstream sections, resulting in a “crowding effect” or positiveThe spillover effect-corporate profits, resident income, nominal GDP will all rebound, thereby increasing the purchasing power of the whole society.Due to the impact of the epidemic this year, the pressure on total demand is even greater.Some of the losses caused by the epidemic have been fully exposed, and some have not been fully exposed. It is necessary to focus on the risk of credit collapse in the short term.The decline in real estate sales growth will inevitably be accompanied by an increase in housing mortgage loans, and a substantial decline in local government land income will inevitably affect local government infrastructure-related loans.If both are significantly reduced, and corporate loans are unlikely to improve, the whole society may face the risk of collapse when increasing credit, which will seriously hit the whole society to increase purchasing power and total demand, and put the economy at risk of a vicious circle.Under the current economic budget, the pressure of government debt expansion and infrastructure investment is more urgent, which is related to whether the cash flow of the residents and the corporate sector can be sustained.”Since many new infrastructure markets are able to do so, the government does not have to invest any more money.” Sauna Yewang: What do you think of the new infrastructure that has been vocal recently?Zhang Bin: The key question for infrastructure investment is where should it be invested?To sum up China’s past experience and lessons in infrastructure investment, government investment should be invested in public welfare or quasi-public welfare infrastructure projects to provide public goods or services to the public, and not in the private sector where the market can be exercised.New infrastructures that have recently received a lot of appeal-whether it is industrial Internet, 5G networks, Internet of Things and other new infrastructures, investments in these fields are profitable, and many companies are now investing in these new infrastructures.Now that the market can do it, there is no need for the government to invest in new infrastructure.Sauna Night Net: In your opinion, where should infrastructure investment be invested?Zhang Bin: We must first consider what is the biggest shortcoming in the field of modern infrastructure?Comparing China’s experience with similar development stages of high-income economies, and taking into account China’s current problems, I think that the biggest shortcoming in the field of infrastructure, or the most lacking infrastructure, is infrastructure related to the metropolitan area.From a global point of view, big cities can provide higher resource allocation efficiency, more job opportunities, and better quality of life. It is a general trend for people to gather in big cities.The same is true in China. More and more people, especially young people, want to enter big cities and stay and work and live in big cities. This demand is huge, and it is a good thing for individuals and the whole society.However, some cities in our city block the invisible fences-house prices. As the city fences, house prices are too high and many people can work in the city, but they cannot settle in.House prices are high rather than high in the central city, not part of the house prices are too high.Compared with the housing prices of some large cities in foreign countries, the housing prices of the four first-tier cities in the north, Guangzhou, and Shenzhen are not high.In high-income economies, the average middle class has the ability to buy a house in an adjacent neighborhood 10 to 20 kilometers away from the central city, and commuting time is about 30 to 40 minutes.However, in China, a large number of people want to enter a big city, even if it is a place in a big city, but the adjacent houses are too high, and it is difficult to settle down even with very hard work.At the same time, a small number of land use efficiency is low, and some land is simply idle.In large cities with large population inflows, public transport facilities have a large gap, lagging behind the development and expansion of cities.At the same time, many supporting facilities for soft public services also have large gaps, such as greening facilities and underground pipes in some cities.Around the construction of the metropolitan area, both hard construction and soft construction require a lot of infrastructure.After these infrastructures are built, they can be used immediately, and at the same time they can drive the economic development of one side.Strengthening infrastructure and public service facilities in the metropolitan area, together with adjustments to land finance, can use some of it and overwhelm some of the housing prices.In this way, part of it can be used, and hundreds of millions of people can live and work in the city with peace of mind, and it also solves one of the biggest problems in China’s current society and economy.Therefore, if there is a new round of infrastructure, the core of the new infrastructure should be the metropolitan area infrastructure.The infrastructure of the metropolitan area does not generally refer to the infrastructure of urbanization, and the infrastructure investment around the metropolitan area should be avoided to bloom everywhere.Where there is a large population inflow, the economy is developing well, and public infrastructure projects and urban public services cannot keep up, the government can invest.However, in areas where population growth and economic performance are not good, the government will return to the old road after investing a lot of infrastructure, resulting in waste of resources.”The problem of financing channels for infrastructure investment is still unresolved.” Sauna Yewang: Some people have reinvested infrastructure investment in the “4 trillion plan”. How to avoid the old road?Zhang Bin: Some people now use naphthalene to view the “four trillion investment plan” and objectively evaluate the “four trillion investment”.Without the infrastructure of the “Four Trillion Investment Plan” as a support, China’s urban appearance in the past decade will not be like this, and there will be no hundreds of millions of farmers entering the city.Of course, the “Four Trillion Investment Plan” also brings a lot of problems, so what is the problem?This requires reflection and combing.Infrastructure investment needs to consider two issues: First, the investment field?Drawing lessons from the “four trillion yuan investment”, government investment should be invested in public welfare or quasi-public welfare infrastructure projects.In fact, the proportion of infrastructure investment in the “Tie Gongji” category has continued to decline over the years, and is currently less than 20%.Most of the government’s investment is now in public facilities projects, and the profitability of these projects is relatively poor.The second question is that investment in public facilities is not very profitable, and market participation expectations are low. Where does the money come from?From the point of view of “four trillion yuan investment”, only more than 1 trillion yuan came from the central government’s budget at that time. Others needed support from local governments, and local governments could not raise huge funds through fiscal revenue.How to solve the huge funding gap?One way is to implement land finance, which further pushes up house prices.Another way is for local governments to borrow money from commercial banks by forming investment and financing platforms.What’s worse is that later, they can’t borrow money directly from the bank. Local governments must make extensive use of other non-bank financing channels, which leads to the expansion of shadow banking.Overall, the previous scale of infrastructure investment has made a great contribution to the Chinese economy, but it has also brought a series of bad results-high housing prices, high leverage, and rising financial risks, all of which require our special reflection.In fact, the issue of infrastructure investment financing channels exposed by the “four trillion yuan investment” has not been resolved.It takes a lot of money to invest in infrastructure, and we must be vigilant in retracing the old path of past stimulus packages.”Solve the source of funds for infrastructure investment through the issue of national debt” Sauna Yewang: To avoid retracing the old road of the past stimulus plan, how to solve the capital problem of urban infrastructure?Zhang Bin: In order to avoid going the old way, the funds needed for infrastructure construction can be solved by issuing central government bonds.If the 4 trillion investment plan used the central government to issue bonds to solve the problem of funding sources, there would not be a large-scale expansion of shadow banking and a rise in risks in the financial system, and there would be no rapid expansion of local government ‘s hidden debt.Powerful land finance.Since it is a public welfare and quasi-public welfare project, it is necessary for the government to pay for it, and do not get involved in commercial financial institutions.Pulling up commercial financial institutions is not only about higher capital costs, these loans do not have enough cash flow support to bomb the financial system, and finally the government has to pay for it.The fiscal needs to expand the deficit rate, we do not have to stick to the 3% red line of the fiscal deficit.Within ten years of the financial crisis, the developing countries such as the United States, Japan, and so on, the economic growth rate was very low or even stopped growing, but their fiscal deficit rate reached an average of about 7%.China’s economic growth rate is higher than these countries, the debt interest rate exceeds the nominal GDP, and the risk of fiscal expansion is completely controllable.The government works to make commercial financial institutions pay more money, which is more risky and uncontrollable.In addition, from the experience of South Korea, Taiwan and other economies, in the process of urbanization, the debt and leverage of these economies are rising.But infrastructure investment is a phased investment and will not grow forever.When the urbanization rate reaches 80%, investment in public infrastructure construction will drop significantly, and the debt rate will slowly converge.Therefore, our fiscal deficit rate does not have to stick to the 3% red line.If you do not use the issue of national debt to solve the fund gap required by the fund’s investment, you still have to follow the old path of financing, which will be difficult to return.”1 should be issued as soon as possible.5 trillion special national debt to help small and medium-sized enterprises, “Sauna Night Net: Is it the most urgent thing to steadily grow through infrastructure investment?”Zhang Bin: The current economic budget requires the government to invest in certain infrastructure, which will drive the demand and investment of upstream and downstream subdivisions, corporate profits, residents ‘income, and nominal GDP will all rebound, indirectly helping small and medium-sized enterprises, but this processIt may take some time, the distant water may not quench the thirst.The most urgent thing now is for small and medium-sized enterprises to survive and take more direct measures to help small and medium-sized enterprises that have suffered severe losses in the epidemic.In response to the contradictions of small and medium-sized enterprises, the relevant departments have issued many policies, but they may not necessarily help small and medium-sized enterprises in transition.Many service SMEs are now running out of cash and have no income and ca n’t survive. They can consider directly subsidizing the SMEs that were severely affected by the epidemic, or granting companies a reduction in their related expenses to help them survive the crisis.Where does this money come from?Enterprises and individuals cannot be relied upon, and taking money from them will have a squeeze effect and bring a new burden on the already insufficient total demand.The government should issue 1 as soon as possible.The 5 trillion-dollar scale of special national debts, with companies and individuals citing the government’s responsibility and ability to bear this burden.The issuance of this national debt is also a supplementary broad credit for the whole society, which increases the supplementary financial assets of the whole society and increases the purchasing power of the whole society. It also helps prevent the collapse of credit.The situation varies greatly across the country. In terms of the use of funds, local governments should accept the supervision of the public in accordance with the principles of “helping the weak” and “emergency”, and send the money to the handicapped in earnest.Sauna, Night Net Editor Hou Runfang Chen Li proofreading Wei Zhuo

Comments

No comments yet.
Comments are closed