Many people do not believe the U.S. will once again dip into the world economy, which tends to optimism on the world economy knowledge is the arrangement began to withdraw from China’s macroeconomic policies to stimulate the main guiding principle. We have the first half of 2008 on world economic trends to determine the errors of optimism once concentrated expression of the developed countries to ease monetary policy when we are in the contract, such an error we have to try again?

So, the central bank to raise interest rates is not because the Chinese economy began to overheat it? Overheating of the economy’s performance, first, the economy continued to rise, first appeared in significant inflation, and that the two often closely related to each other, because both are due to excess demand will bring high growth and high inflation.

China’s economy is the existence of excess demand? The fact that I’m afraid not. Demand from the three main view, consumption remained stable this year, investment growth rate in the first quarter 26.4%, 25.2% in the second quarter, third quarter has dropped to 23.1%. From the export demand, growth in the first 8 months by 35.5% in September month has dropped to 24.7%. I have been very concerned about the investment in the growth of investment in new projects, because the investment is in the bulk of Chinese demand, while investment in new projects and represent the occurrence of future investment needs. The first 8 months of this year, all new investment projects fell by 2637, and September month to reduce the 10,324, almost 8 months before the program 4 times less, so the new investment on the growth rate of the past 8 months 26.3%, plummeted to 13.3% in the month of September, which indicates that if the fourth quarter no significant increase in new projects, next year’s investment growth is likely to drop to below 15%, and if so, coupled with next year because weakening U.S. economy is once again driven decline in external demand in China, China’s economic growth rate in 2011 may not even 8% is also retain his job.

It is because of changes in demand in China is rising but the trend is not decreasing, has significantly affected the growth of supply. To see growth in industrial production, 17.6% in the first half into the third quarter of 7,8,9 months were 13.4%, 13.9% and 13.3%, which is a significant downward trend. In addition, the social consumption decline also reflects the economy is to go cold and not take the heat this fact, in August of social consumption is over-year and 2%, and 9 in July, plummeted to a negative growth of 12%, industrial consumption is a negative growth 15%. From this trend, entering the fourth quarter probably have to drop the post-industrial rate, GDP growth rate may be from 9.6% in the third quarter continued to decline to 9% or even lower.

But the demand will rise in the price down why it? This also explains the occurrence of inflation in China is not due to excessive aggregate demand, but another reason, that reason is the rising international commodity prices caused by imported inflation, and by the domestic agricultural prices caused by structural inflation, current inflation and the fourth quarter of 2006 to 2008 occurred in China during the first half is a type of inflation that is caused by the rising cost of rising prices, not too much money caused by the overall price increases.

This is what I oppose the use of interest rates in particular ways to cope with China’s current situation because of inflation. Because no matter the input type or structure of the first type of inflation would push up production costs, thereby reducing corporate profits, corporate profits in order to maintain the level of cost increases will put pressure on the release to the market. Interest from bank profits, plus interest is to make corporate profits, and therefore more reluctant to borrow from banks, with the result although it could drive down demand growth and inflation rates, but also the level of corporate profits due to greater reduction in injuries economic growth, economic growth because profit is the driving force of endogenous. Since the fourth quarter of 2008, the Chinese Government took a great effort to pull out of China’s economic depression only then trap into this year, the endogenous driving force of economic growth has resumed, the performance of non-state investment share of 4 percent from the end of rose to 6 percent, although they have not been restored to more than 70% before the recession, but still in recovery, but I am afraid that another interest rate move was a driving force for economic growth within the contusion of Health.

Inside and outside China, driven by inflation will not only break

In the global context of free movement of capital, interest rates are not reduced liquidity measures, but long into the initiatives to promote increased mobility. China’s foreign exchange reserves in the third quarter increased by 194 billion U.S. dollars, the trade surplus plus FDI over the same period less than 500 billion dollars, that the proportion of international hot money inflows has risen to 3 / 4, to see that hot money flowing into the major international currencies and the RMB between spreads and RMB appreciation trend. Since September, the United States and Japan have carried out the central bank cut interest rates, but in China’s central bank to raise interest rates, and more to increase the yuan and the spread of major currencies, it is envisaged that, after entering the fourth quarter will come more international hot money, the central bank The money supply will result more.

Meanwhile, as the financial crisis by the United States triggered a global recession is likely to continue long-term, quantitative easing monetary policy will also be long-term oriented, which triggered a global craze for money, will long continue to boost the international commodity price, so that China’s imported inflation has intensified, along with conflicts between people and land in China by the tensions caused by rising prices of agricultural products also have long-term and long-term economic growth in China will be faced with higher inflation troubles. In such a situation, if deliberately lowered the inflation rate to 3% or less, the process of economic growth can not be normal, because the conditions did not meet the monetary growth, business costs can not be formed to release the pressure. So I wrote in August 2008 was to propose ideas in an article in the era of inflation has been rigid, as long as there is no prejudice to the growth of inflation should be tolerated, and proposed a formula:inflation rate of economic growth. Because for the people’s livelihood, the growth is even more important result, there is no wealth growth, inflation rate of zero does not make any sense. At the same time, fiscal transfers should be a means to protect low-income people, such macro-control policy, is “money to maintain growth, financial stability” is in the changed times, the Chinese macro-control should be innovation.

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