Interview With Liu Feng, Chief Economist Of Galaxy Securities: China Has The Ability To Become A New Global Security Asset Center

Where will global assets flow in the post epidemic era?

"At present, the global epidemic situation is still evolving, the external environment is becoming more complex and severe, and the domestic economic recovery is still unstable and unbalanced." The Political Bureau meeting of the CPC Central Committee held on July 30 made such a judgment on the current economic situation. In this context, the meeting proposed to do a good job in cross cycle adjustment of macro policies, maintain the continuity, stability and sustainability of macro policies, make overall plans for the convergence of macro policies this year and next, and maintain China's economic operation in a reasonable range.

In response, Liu Feng, chief economist of galaxy securities, said in an exclusive interview with the 21st century economic reporter that the meeting of the Political Bureau proposed to "do a good job in cross cycle adjustment of macro policies", while stabilizing the domestic economy, it can also provide relatively stable investment expectations for investors at home and abroad. With such macro policies, China has the ability to become a new global security asset center in the post epidemic era.

China has the ability to become a new global security asset center through further reform and opening up. Visual China

Promoting the construction of global security asset Center

At present, the regulatory authorities have also noticed that there are still many challenges for China's economic normalization in the post epidemic era.

In Liu Feng's view, the deployment of "cross cycle adjustment of macro policies" proposed by the Politburo meeting can stabilize the domestic economy and provide relatively stable investment expectations for investors at home and abroad. Such a coherent and stable macro policy environment will effectively avoid large capital inflow and outflow, and also provide support for China to become a new global security asset center in the post epidemic era.

In addition to macro policy support, Liu Feng believes that other advantages of China's market also enable China to become a new global security asset center through further reform and opening up.

First, the "safety cushion" of China's interest rate pricing system is still considerable.

Since the beginning of the 21st century, the central bank has not really used its own balance sheet tools to implement quantitative easing in the United States, Europe and Japan. There is still much room for interest rate instruments and monetary quantity tools (reserve ratio). That is, the yield of China's safe assets still has a high margin of safety because of the space of the central bank's interest rate pricing benchmark, Compared with the U.S., Europe and Japan which have fallen into or will fall into the negative interest rate range, "safe assets" such as national debt have greater attraction.

Second, China took the lead in controlling the epidemic situation and began to return to work. The national capacity demonstrated in the anti epidemic process showed that its overall macro risk was lower than that of other economies, and the expected stability of various policies related to national development was higher. Therefore, the attractiveness of China's market to international investors should not only be based on the low valuation, but also from the macro hedge value.

Third, China, as the world's second largest economy, has maintained its rapid economic growth and has sufficient attraction for international assets.

However, Liu Feng also believes that China still needs to further open up and reform, constantly optimize and enrich the paths and products of foreign investment in the domestic capital market, and smooth the channels for domestic capital investment to overseas markets, so as to increase the attractiveness of China's assets and the convenience of foreign investment allocation.

Liu Feng pointed out that at present, the degree of domestic capitalization and securitization still needs to be strengthened. This year, China's public offering infrastructure securities investment fund was officially launched, and there is still room for further enrichment of inter-bank monetary instruments. The term structure of domestic bond products is not reasonable, and the futures products of national debt market still need to be expanded.

China's bond market also has a lot of room for development. We need to reform the issuance and registration system, speed up the implementation of the registration system, reduce the restrictions on investors entering the market, improve the market liquidity and trading convenience, constantly enrich varieties, improve the term structure, improve the effectiveness of credit rating, and optimize the market-oriented disposal mechanism of bond default.

Only in the subdivision of bond rating, the domestic rating market is still not in line with international standards. There is a situation of false high domestic rating. The explosion of AAA grade bonds will undoubtedly affect the overall reputation of China's assets. In addition, the low degree of internationalization also means that overseas investors can not really understand the value of domestic assets, and the relevant information and evaluation obtained by them are less and inaccurate. In this regard, Liu Feng believes that we should break the barriers between various types of bond markets, straighten out the credit risk pricing mechanism of debt financing tools, and improve the construction of a series of supporting mechanisms such as the internationalization of credit rating, so as to promote the rapid development of the bond market.

In addition, Liu Feng believes that under the condition that the relevant supporting basic conditions and management are relatively perfect and the exchange rate is expected to be basically stable, the capital control will be relaxed in an orderly manner and the RMB internationalization will be gradually realized. On the path, we can gradually explore the new macro Prudential Management System of capital flow from the channel approval system to the new capital flow macro Prudential management system focusing on the capital in and out account management of financial intermediaries. To steadily promote the opening of capital account, we need to pay attention to the risk prevention of two-way opening of capital account in real time, distinguish the normal foreign exchange demand and short-term speculative demand in the operation of the real economy, prevent the short-term fluctuation of exchange rate from being used by speculators, and prevent the short-term foreign debt risk of private sector and the risk contagion of international capital market.

On the whole, in Liu Feng's view, how to further improve a series of financial infrastructure construction through the reform and opening up of the financial system, such as legal system, multi-level market system, product system, international credit investigation and credit evaluation system, international research pricing and valuation system, capital flow and exchange convenience, etc, To achieve a higher level of marketization, legalization and internationalization of China's financial system to attract global investors is the only way for China to build a new global safe asset center.

The reform of registration system also needs to perfect the exit system

Specific to the equity market, in recent years, a shares have also been paid special attention by overseas capital.

In May this year, MSCI international index compilation company announced the quarterly adjustment results of the index in May 2021, adding 109 stocks, including 39 A-share stocks and 5 Sci-tech Innovation Board stocks. This is the first time that sci-tech innovation board shares have entered the MSCI flagship index series.

In fact, as a test field of domestic capital market reform, the science and technology innovation board has improved the attractiveness and competitiveness of China's capital market through the reform of registration system and rich listing standards. Today, the science and technology innovation board has been running smoothly for two years, with more than 300 listed companies.

Liu Feng believes that the registration system reform is another major reform measure of the domestic capital market for many years after the reform of the non tradable shares. It further improves the level of marketization, sets up more inclusive listing standards, and makes information disclosure more complete and transparent, basically solving the "entrance" problem of the capital market.

However, he said that the key to the reform of domestic capital market is not "import", but "export". Liu Feng points out that the number of Listed Companies in China has doubled in the past decade, but the total market value has basically not changed. There are zombie enterprises occupying market resources. Hot money in the market and some retail investors are keen on chasing these stocks with delisting risk.

"Only when there is entry and exit can we create a market ecology of survival of the fittest, realize the effective allocation of capital market resources, and build A-share into a more international attractive global market." Liu Feng said.

In addition to the delisting system, Liu Feng believes that the reform of the capital market needs to continue to maintain a "zero tolerance" attitude, crack down on all kinds of illegal activities, increase the supervision of securities account changes, and crack down on illegal behaviors such as insider trading and market manipulation from the root. At the same time, we should strengthen the construction of market mechanism, improve the market mechanism of survival of the fittest, force listed companies to improve the quality of governance, strengthen investor protection, so that there are laws to follow, improve the regulatory capacity, and achieve precision strike.

It is worth mentioning that in the recent A-share market, due to the changes of relevant policies and other factors, some emerging industry stocks' share prices fluctuated, which also attracted the attention of investors around the world.

Liu Feng believes that from the recent statements of the regulatory authorities, we have realized that there are some chaos caused by the disorderly expansion of capital in the market. If we do not carry out effective containment and solution, it will further affect the stability of the domestic capital market and economic development.

"Whether it's for platform economy, off campus training institutions, medical beauty and online games, the original intention of regulation is to promote the orderly and healthy development of the industry, not to restrict and suppress relevant industries." Liu Feng said that for the industry and the market, on the one hand, it is necessary to follow its objective development law, on the other hand, it should also prevent capital intervention from leading to financial de substantiation, leading to monopoly of platform economy and forming systematic risks affecting economic development.

In fact, putting capital under regulatory control to promote its healthy and orderly development and form a consistent and stable industry policy environment can also stabilize investors' expectations for the future development of the industry and enhance the attractiveness of related assets. However, Liu Feng also pointed out that during this period, the regulatory authorities should also strengthen the communication with the market and the transparency of information disclosure, so that investors can fully understand the policy connotation and form an accurate study and judgment of industry investment.