PBOC ex-deputy Ms. Wu Xiaoling is a sharp figure in China’s financial officials’ community, as she is straight forward and willing to openly talk about the reality and the risks. Yesterday, in a top Chinese financial conference, Lujiazui Forum, she had a very short but interesting unofficial Q&A with a journalist, which grabbed all the Chinese’s eyeballs.
Journalist: Do you think the property price is too high in China?
Wu: Can you afford to buy a house or apartment? You don’t think the property price is high?
Journalist: Do you think PBOC will continue to ease monetary policy aggressively and flood the market?
Wu: I just talked about this issue in the forum, do you really think PBOC still will ease aggressively?
Apparently Ms. Wu are unhappy about the manmade and ridiculous high property price, and as a former PBOC deputy and still a senior official (Vice Chairman of the Financial and Economic Committee of National People’s Congress), she has good insight of PBOC’s next move: no further aggressive easing.
Ms. Wu gave a fantastic speech in the forum, and I highlight couple points as below:
- China generated RMB 30 trillion credit from 1979 to 2008, but we generated RMB 63 trillion credit from 2009 to 2014, which means in the last seven years we have doubled what we had done in the former 30 years.
- The high property price already made lots of people frustrated. Ease monetary policy either makes the CPI higher or makes the asset price higher.
- Under the supply side reform, it’s normal to see default of financial products and bankruptcy of the banks. It’s a process to eliminate “excess money in the system”, and it will be long and painful. However, if we think it’s the right thing to do, we should go forward.
- Currently, China does not have system risk in our financial system, but small risk events will accumulate and create bigger macro risk.