On the evening of May 8, RDCY Seminar Series No.112 was held in Chongyang Institute for Financial Studies at Renmin University of China (RDCY). Wang Jinbin, deputy director of School of Economics of the Renmin University of China, was invited to give a lecture on the global economy adjustment against the context of "economic rebalancing and unsynchronized cycles of the economy and finance" .
In the speech, he said that the current world economy is facing two core issues, or two uncertainties for the future economic growth: one is the adjustment of rebalancing, and the other is out of synch of the two cycles (economic cycle and financial cycle).
He said that a country will have surpluses or deficits in the exports and imports. It will bring the imbalance, during which the economic growth rate will slow down, and even bring about many problems, so it is necessary to adjust the imbalance to rebalancing the global economy.
However, the adjustment cost is very high. By the mean of trade and exchange rate frictions between countries will increase macroeconomic volatility. In the domestic, it needs to adjust the proportion of investment in GDP, and stimulate consumption to meet the demand, and the cost is equally very high. Therefore, in the macroeconomic regulation and control, supply-side and demand-side management are indispensable.
About the two cycles, The economic cycle focuses on GDP and unemployment; the financial cycle focuses on currency and credit.
Since the 1980s, the continuous expansion of the global financial market make us realize that one cycle is not enough to represent the entire economic laws, because financial assets and real assets are actually different. For example, in recent years, China’s economic growth rate is declining, but housing prices are rising. From the perspective of global macroeconomic policies, since the subprime crisis in 2008, the financial cycle has become a new hot topic in the research.
Most of research results have pointed out that the financial cycle is longer than the cycle of the economy, and the amplitude is much larger. The two unsynchronized cycles actually limits the macroeconomic policy control power of the countries.
In short, the economic imbalances at home and abroad and the two unsynchronized cycles of economy and finance are the biggest and most central issue facing the global economy, which challenged the government’s policy choices. They can only adopt structural policies and solve specific problems through tax cuts and differential policies.