Liu Zhiqin, a senior fellow at the Chongyang Institute for Financial Studies of Renmin University of China, was interviewed by CCTV Global business programme on G20 and current economic condition.
Q. How necessary it is for China to cut interest rate and RRR (reserve requirement ratio)and what influence it will make?
A. The message is not new for the market because the market has been waiting for such announcements for a few weeks. The economic development in China is waiting for the final decision from the NDRC, whether to cut the interest rate or to cut the RRR. I think both the policies should be conducted in accordance to the international conditions. The RDA was to help increasing the interest rate and China should take counterpart measures to protect the economy. Our economy especially the export business is mostly dependent on the interest rate and reserve rate. For the banking sector they also need to cut the reserve rate to increase the liquidity of the market. The market has been waiting for the policies so there would not be big influence.
Q. What does the worldwide monetary easing indicates about the world economy?
A. The real economy is dying in these countries. The economy, especially manufacturing sector is having a hard time in the developed nations like Australia. In Australia, the economy is dependent on the commodity mining and business. If the price is too high, there would be nobody to buy. But China is the largest buyer in commodity materials, so it is clever for Australia to do it. In terms of the UK, the Brexit will damage the image of the economy, so it has to do something in the interest rate to make some arrangements. That is also the expectation of the market.
Q. On the crossroad towards free trade and protectionism, which will the world choose?
A. In both sides we should be cautious. In my opinion there is no road to free trade in the world. Because trade is not a duty-free shop for you can buy anything without any duties to pay. But the means like anti-dumping is not acceptable, which is total protectionism. Protectionism in different countries is in different policies, harming the trading conditions and principles. In the G20 meeting in Hangzhou, I think China should still strongly promote the free-trading agreement to have a general and overall condition with all countries on the free trading negotiations.
Q. In G20 China may have a good chance to promote its initiatives. What do you think about that?
A. We have come to the critical conditions foe the OBOR initiatives. We have already overcome the first stage, now we have to convince the world to understand, to accept and to participate in this initiative. The most difficult thing is to make people and government outside to understand the nature of OBOR. There are lots of confusions among people and companies, so they have concerns on uncertainties. It is a good chance for China to make it more transparent to make people accept, understand and participate the initiative, which will benefit the whole world. It is more than win-win. The AIIB is promoting the projects, and all the people will benefit from the initiative.