Ten years of economic overheating to bring what lessons

Now we have these problems, the first few years after the two overheating, from 2007 to 2004, and later in order to deal with the world financial crisis, we stimulate the economy, and then from 2010 to 2009 and another round of overheating, two times over and over again, the extent of overheating than 90 years ago is still serious.

The basic problem of China's economy, now is the excess capacity, deflation, we have 44 consecutive months of producer price index is negative, the last 90 years is 31 months, now is 44 months. And debt problems, etc.. These problems are typical of the downturn in the economic cycle. The downturn is due to overheating, there are a lot of policy issues, we are now entering a downturn, which is a process of adjustment.
Two years ten times the economic overheating bring about what lessons?
The first lesson is to prevent overheating. Now we have these problems, the first few years after the two overheating, from 2007 to 2004, and later in order to deal with the world financial crisis, we stimulate the economy, and then from 2010 to 2009 and another round of overheating, two times over and over again, the extent of overheating than 90 years ago is still serious. After the first time in the 90's, the first time to adjust, but also overcapacity, deflation, but also the failure of enterprises. In the 90's 8 years, the downturn, decline, and then in the doldrums, the situation has been to 2002 there are deflation. These many people do not remember, always think we are more than 10% high growth.
14% of the kind of high growth, will produce economic overheating. To prevent overheating, not to overheat the point of the thing, the anti - is now this thing, then we do not bother, at the time of the day, happy ah. Said macro control to suppress the overheating of the people are against. We are now a lot of problems, not the normal growth of the results, is the past 10% or more of the heat caused by the growth of the hangover. The various research groups suanlaisuanqu, our Chinese normal growth is 7 - 9%, there is a ten years is 8 - 9%, there is a ten years is 7% - 8%, we are now about 7%. We can not put the past high growth as the norm, said it is now less than 14%, lower than the 14% so called low growth, not the thing.
Second, the macro policy is a timeliness. The basic role of the macro policy is counter cyclical adjustment. I want to take the policy of suppression of economic overheating, I want to take a stable policy, boosting the economic cold policy. But the situation of economic fluctuations is constantly changing, with this change in a timely manner to adjust policy.
Our lesson is that we have a round of overheating in 2009 and 2010. 2009 adopted the world's largest stimulus, in April 2010 to the purchase of housing as a symbol, to take a series of austerity policies, which is right. When the reserve ratio was mentioned 20%, the rate of 3%, in the case of the world interest rate heat, referred to 3% this is right. But four or five years later, the heat disappeared, in the case of relatively cold deflation, continue to implement these policies are outdated. It should be timely to withdraw from the tightening of the policy, and now the lesson is to quit a bit slower, leading to our current economy is too cold. Under normal circumstances, the 40 months of deflation, that we are now the economic growth rate is lower than the potential growth rate.
Third, the government policy is to play a role. It is also necessary to use some of the administrative means in an emergency. Economy is too cold, the government do things but also righteous to do, and want to be in place and overheating when the timely exit to suppress, when cold, when the other economic entities in the face of excess investment is when, need not shy feel government investment is not good. Enterprises do not invest in real estate companies do not invest, the government should be a little more than the government's investment, to supplement the shortage of demand.
The government now, is a bit shy, because everyone in the criticism, said the government should not invest. But on the other hand, there is a problem recently, that is, the government does not act as a, their own money is not spent, their projects are not cast, the government's savings in a substantial increase. From 2012 to 2014, the government increased savings equivalent to 3% - 4% of GDP, these are going to spend, 0.3%, 0.4% of the total GDP growth should be some.

Adjustment of the economic downturn has five major role
We have experienced a wave of 90 years, and in 2004 began to now ten years, and has experienced a wave of volatility, we should learn from. We are now in the doldrums, the downturn, is being adjusted. Now we are complaining that the situation is not good, the economy is not good, but to fully understand the positive role of the adjustment period.
First role, the survival of the fittest is happening. Economic overheating when no one was eliminated, who have a bowl of rice to eat, and now a lot of excess capacity and excess companies are built up at that time. By now, the real estate industry has been integrated, some of the efficiency of the past is relatively low, these enterprises have been eliminated. Now we have a lot of mechanism, the problem is that some mechanisms to resist this elimination. In particular, some state-owned enterprises, and then including some local enterprises, local GDP, and so on, supporting some state-owned enterprises, including some private enterprises, to subsidize and so on. Should actively promote the elimination, the role of government is the underpinning and social policy underpinning, make industrial optimization process as soon as possible.
Second role, in the downturn, we have finally to improve efficiency, improve the quality of the product, with more attention. The overheating of the economy when a fish eye is jumbly, Nishajuxia, and now we are aware of, because the price has dropped, because the business is bad, need to pay more attention to the cost, pay more attention to the efficiency.
I remember in 2001, 2002, when the last round of adjustment to the end, when there was an important phenomenon, the currency is still tight, prices are still falling, but the company's profits began to grow, because the profit growth of investment companies began to grow. At that time I also specifically wrote an article "effective price cuts", that price is because the cost of the decline, not equal to the profit does not grow, does not mean that the efficiency is not improved, does not mean that the investment will fall, which is the result of adjustment.
Third role, so that we become more and more aware of the role of professional. In the past, when the heat, the sound is the sound of the "diversity", what can you make money. Now to improve efficiency, and to improve the quality, we found that we have to take the road of specialization. Recently these years of economic overheating, some enterprises in all directions, every day thinking about transformation, every day thinking about which have investment opportunities, no attention and professional to do their own thing, and over the past few years has focused professional do a good job in their own products, expand the market of the enterprises, orders are now actually increased.

The fourth role, so that the structure of real adjustment. 14% growth of that structure, including the structure of the time in 2010, more than 10% of the structure, it must be invested too much. Now over the past, some new industries in the growth, people's demand structure is gradually changing, coupled with the level of income to a certain extent. Services for the first time this year, more than 50% of GDP, consumer goods growth is still relatively normal, and consumer related industries are now recovering faster. Some people say it is impossible to have the past so much demand, it is impossible to have, it is impossible to have the need to support 14%, we are now supporting the needs of 8% - 7% or completely to achieve, in the next few years are still guaranteed these needs.
The last point, to the recession, we have a relatively strong sense of innovation. Innovation boom is a large part of the reform, the reform of the government and the market relations, registration system, free trade zone, and so on, now enterprises, individuals are more want to innovate.
Now in the downturn, it may be the process of innovation, and this innovation coupled with our institutional reform, including the survival of the fittest, improve efficiency, professionalism, innovation, for the next round of economic lay a good foundation. In the long run, if we have the potential to give full play to the Chinese economy in twenty years, ten years, and even thirty years of normal high growth is now about 7%, after 6%, then the next is 5%, is still possible, we should have full confidence.
(this article sort out the speech from Fang Gang in the second Dameisha forum in November 13, 2015).
(the author of this paper is the president of the Institute of integrated development, the director of the National Institute of national economy, Beijing. )