Chapter 455 Economic Seminar

In order to help his father Fan Heng build momentum and connect with people in Beijing, Fan Wubing went to Beijing and held several high-end cocktail receptions and seminars, mainly focusing on the current financial crisis, and also organized some charity activities.

Because of Fan Wubing's intervention, although the central government also expressed support for the SAR government during the financial crisis, the pressure it faced was much less. It did not even provide any foreign exchange reserve assistance to the SAR and maintained the Hong Kong dollar. The stability of the exchange rate was something that was not thought of at the beginning.

Even so, interest groups led by Soros are still creating public opinion, saying that the authorities in mainland China and Hong Kong are manipulating exchange rates and violating the principles of free economic markets. This is really shameless.

Affected by the financial crisis, the stock indexes in the United States and Hong Kong fell below historical records, and the crisis also spread to South Korea and Japan. Since China implements foreign exchange controls and a fixed exchange rate system, the RMB is not a freely convertible currency. There is no selling pressure from the international financial market, and there are no objective conditions for international speculative capital to directly attack the RMB.

It is worth mentioning that during the financial turmoil, both the United States and Japan wanted the yuan to depreciate.

Although devaluation can enable more than one-third of the export industries of the national economy to gain new competitiveness, it means that it will be more difficult for other Asian countries that compete with China to grow economically, and the Asian consumer market is also an important part of China's foreign trade. Furthermore, the depreciation of the RMB is more harmful to China, because depreciation will slow down the inflow of foreign capital and intensify the outflow of foreign exchange, which will restrict the growth of the Chinese economy, directly affect the balance of international payments, and may cause further depreciation of the RMB. A vicious cycle of renewed inflation.

Therefore, Zhu Ban, who has been promoted to Prime Minister, publicly promised on behalf of the Chinese government that the RMB is very strong and will not depreciate, which is in line with China's long-term interests. The Chinese government's insistence on not devaluing the RMB has largely prevented international funds from radiating the crisis of the financial crisis to the country and stabilized the confidence of Asian countries.

At the end of October, Fan Wubing went to Beijing again to attend an economic seminar hosted by senior officials to discuss the impact of the current financial crisis in Southeast Asia to assist senior officials in formulating corresponding economic policies.

Before the meeting, Wuji met with Mr. Zhu, who had become Prime Minister.

For example, when Boss Zhu and other senior officials had a conversation with Fan Wu Bing before, was it still a very casual conversation between elders and juniors? After Fan Wu Bing helped the Hong Kong Special Administrative Region weather the financial crisis, it became much more serious.

after all. People like Fan Wubing who can freely use tens of billions of dollars to help stabilize the Hong Kong dollar exchange rate. There is no second person. It is the entire local financial groups in Hong Kong. He doesn't have the financial resources or the courage.

"I heard that you gained a lot in this financial crisis?" Boss Zhu sat next to Fan Wubing. asked very casually.

Fan Wubing nodded and said, "I'm not worried that the Hong Kong Monetary Authority will lose all my money.

I won't be able to pay back the money by then, so I will definitely have to get some profits back from the market. "

Boss Zhu smiled. "It's not that simple, isn't it? I heard that you were fighting for profit. You took Soros's back and put him in a dilemma on the Hang Seng Index. He came back defeated."

Fan Wubing chuckled. No denial. In fact, he did it very well this time. While Soros and others were entangled with the Hong Kong Monetary Authority on the Hong Kong dollar exchange rate issue. Short the Hang Seng Index. Not only does it release short energy. It also caught Soros and others off guard. Not only does it not have much room for profit on the Hang Seng Index. The Hong Kong dollar is also struggling. I am also worried about being trapped in the Hong Kong market and unable to get out. Forced to accept this failure.

"You can give us a reply at the seminar later." Boss Zhu suggested.

"Yes. In fact, I have something to say. I won't say it out loud, but can this grassroots seminar be kept confidential?" Fan Wubing asked.

"No minutes of the meeting are taken. It's a pure seminar. The participants are all senior executives or our economic experts." Boss Zhu replied.

Fan Wubing nodded and agreed.

When they went to the venue, Fan Wubing saw three circles of people around the round table. There were more than a hundred people in total. Most of the Standing Committee members and members of the Politburo were present, and some were well-known people in the country. Among the economic experts, there seemed to be an old professor who was a burden. Fan Wubing thought to himself, this lineup is really big enough.

It seems that senior officials are paying more attention to economic issues, which is a good thing.

After everyone arrived, the meeting began. An expert from the Academy of Social Sciences was analyzing the causes of the Southeast Asian financial crisis.

"In recent years, Western investment banks, especially those from the United States and Europe, have begun to establish a monopoly on financial services in Southeast Asia. Some analysts point out that since 1991, India has

The capital markets of six economies with high exchange rates, such as China, Malaysia, the Philippines, South Korea, Taiwan, China and Thailand, have absorbed the vast majority of financial instruments invested by major institutions from different countries in the six Southeast Asian economies. Institutional investment from the United States and Europe accounts for more than 50% of foreign capital in Southeast Asia. "The sixty-year-old economist talked eloquently, "The Asian financial crisis also has its important internal cause, which is the economic vulnerability formed by dependence on the US dollar, making Asian currencies the victims of the US dollar knife. In order to attract foreign investment, especially US dollar direct investment, Asian countries dominated by export-oriented economic development models have adopted a fixed exchange rate system to peg to the US dollar, so that foreign direct investment will not suffer exchange rate losses due to exchange rate fluctuations after the investment expires. "

Seeing that everyone was a little confused, he continued to explain, "For example, US dollar investors lend at a very high interest rate. When the loan expires, they can also exchange local currency for US dollars at a fixed exchange rate, and obtain stable interest income. If the exchange rate falls, that is, the local currency depreciates, then they will lose money, and the size of the loss depends on the extent of the depreciation. In short, these investment institutions are betting that the local government is able to maintain a fixed exchange rate. Therefore, a fixed exchange rate is a necessary condition for attracting foreign investment. "

Fan Wubing also has a deep understanding of this point. At that time, in order to obtain more trade surpluses, Asian countries adopted a lower exchange rate than their competitors to peg to the US dollar, that is, to gain competitive advantages in export products by currency devaluation. China also joined this group in the early 1990s, and the RMB depreciated from one US dollar to two RMB before the exchange rate reform to one US dollar to eight point three RMB.

Under the exchange rate system pegged to the US dollar, the economy can take advantage of the depreciation of the US dollar.

However, there is also a huge risk hidden in doing so. When the US dollar appreciates, the currency pegged to the US dollar will also appreciate. If its economic aspects cannot support the appreciation of the exchange rate, or it is strong, then it is artificially overvaluing its currency.

In fact, in the international foreign market, the exchange rate of the US dollar against major currencies turned from depreciation to appreciation in 1994. Due to the continuous and substantial appreciation of the US dollar, the real effective exchange rates of major Southeast Asian currencies such as the Thai baht have continued to strengthen with the US dollar, weakening their export competitiveness. The decline in exports has led to a current account deficit Rapid expansion.

The current account is an important item in a country's income and expenditure. If there is a current account deficit, it has to borrow money to survive. There are generally two ways to borrow. One is to devalue the local currency and reduce the export cost of domestic goods, thereby increasing export surpluses, using trade surpluses to make up for the current account deficit and achieve a balance of international payments. Of course, the government can also implement export subsidies, such as export tax rebates, to increase surpluses, but this will be restricted.

However, a fixed exchange rate is a necessary condition for attracting foreign capital. To lower the exchange rate, the exchange rate must be allowed to float freely, which is a contradiction.

There is also a more direct method, which is that the government uses various preferential policies and high interest rate policies to attract more foreign capital inflows, use capital account surpluses to make up for the current account deficit, and achieve a balance of international payments. The prerequisite for policy adjustment is the opening of the capital market, that is, capital can flow in and out freely, and there must be a capital account surplus when the inflow is greater than the outflow.

Under the housing system, because the Thai baht exchange rate is artificially fixed, it loses the function of adjusting the trade gap and the balance of international payments. Faced with the ever-expanding current account deficit, the Thai government actually has only one choice, which is to speed up the pace of capital market opening and attract more foreign capital inflows through various preferential policies and high interest rate policies.

The peg system and high interest rate policy enable speculative capital to achieve risk-free arbitrage. At this time, foreign capital, especially hot money, will pour into Thailand.

The large inflow of capital is certainly not a bad thing, but if there is no way to lock in these capitals and make them serve the economic growth of this region for a longer period of time, then the problem is serious. Short-term capital is obviously more speculative capital.

"With the outflow of short-term capital, Thailand's economic growth has slowed down significantly. At this time, an expansionary monetary policy is needed to stimulate economic growth. However, in order to maintain a fixed exchange rate pegged to the US dollar, to prevent foreign capital outflows and to curb asset price bubbles, the Thai central bank is forced to continue to implement a tight monetary policy, continuously tightening money supply and continuously raising interest rates. Last year, Thailand's interest rate reached 13.25 percentage points, the highest level among Asian countries and regions at that time." Economic experts analyzed, "Faced with such high interest rates, the pressure on the Thai government is obviously very great, and the national economy is on the verge of collapse."

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