Everything is Under Control

Note: This is a translation of an article posted on The Economist earlier, however not the official translation. The Economist was not approached for translation which is not for any commercial purpose. The translation presents another perspective on China's economy, instead of any endorsement. The translation should NOT be used for any commercial purpose by anyone. Without my prior written consent, anyone is forbidden to copy, distribute or publish it in any manner on any media. I should NOT be responsible for any damages thus occurred to any person.

China's Economy

中国经济

The yuan and the markets

人民币与市场

Strains on the currency suggest that something is very wrong with China's politics

人民币承受的压力说明中国政治大错特错了

“WHAT if we could just be China for a day?”mused Thomas Friedman, an American columnist, in 2010.“…We could actually, you know, authorise the right solutions.”Five years on, few are so ready to sing the praises of China's technocrats. Global markets have fallen by 7.1% since January 1st, their worst start to the year since at least 1970. A large part of the problem is China's management of its economy.

“让我们做一天中国会怎么样？”美国专栏作家Thomas Friedman在2010年沉思道。“…你知道，我们其实可以给出正确的解决方案。”五年来，没有几个人会随随便便给中国的技术官僚大唱赞歌。1月1日以来，全球股市下跌了7.1%，是至少从上世纪70年代以来开局最差的一年。中国的经济管理是此次股灾的一大元凶。

For well over a decade, China has been the engine of global growth. But the blistering pace of economic expansion has slowed. The stockmarket has been in turmoil, again. Although share prices in China matter little to the real economy, seesawing stocks feed fears among investors that the Communist Party does not have the wisdom to manage the move from Mao to market. The rest of the world looks at the debts and growing labour unrest inside China (see article), and it shudders. Nowhere are those worries more apparent—or more consequential—than in the handling of its currency, the yuan.

十多年来，中国一直是全球经济增长的发动机。但快速增长的中国经济已然放缓，股市再度动荡不已。在中国，股价对实体经济的影响微乎其微，但股市动荡引发投资者担心共产党没有从毛时代进入市场经济所需的经济管理智慧。其他国家关注中国国内的债务与日益增加的劳工骚乱（详见文章），它颤栗了。全世界最担心的是中国政府应对人民币贬值的方式，它的影响力也是最大的。

Faulty forex

错误的外汇政策                                                                                                                China's economy is not on the verge of collapse. Next week the government will announce last year's rate of economic growth. It is likely to be close to 7%. That figure may be an overestimate, but it is not entirely divorced from reality. Nevertheless, demand is slowing, inflation is uncomfortably low and debts are rising. The bullish case for China depends partly upon the belief that the government can always lean against the slowdown by stimulating consumption and investment with looser monetary policy—just as in any normal economy.

中国经济还没到崩溃的边缘。中国政府将于下周公布去年的经济增速，预计将稍低于7%。这个增速可能高估了，但还是有点现实基础的。但内需在萎缩，通胀率低得令人不安，债务在增加。看好中国经济前景的部分原因是相信中国政府可以放宽货币政策，从而刺激消费和投资，进而遏制增长放缓——任何正常的经济体都概莫能外。

Yet China is not normal. It is caught in a dangerous no-man's-land between the market and state control. And the yuan is the prime example of what a perilous place this is. After a series of mini-steps towards liberalisation, China has a semi-fixed currency and semi-porous capital controls. Partly because a stronger dollar has been dragging up the yuan, the People's Bank of China (PBOC) has tried to abandon its loose peg against the greenback since August; but it is still targeting a basket of currencies. A gradual loosening of capital controls means savers have plenty of ways to get their money out.

但中国并不正常，它陷入了市场与政府控制之间危险的无人区。人民币就是这种危险境地的最好证明。继一系列货币自由化的小步快跑之后，中国现在实行半固定汇率与半自由资本管制政策。部分原因是强势美元提振了人民币，中国人民银行（PBOC）从8月起尝试废除其松散地盯住美元政策，但依然盯住一揽子货币。逐步放松资本管制意味着储户有很多方式将资金转出中国。

A weakening economy, a quasi-fixed exchange rate and more porous capital controls are a volatile combination. Looser monetary policy would boost demand. But it would also weaken the currency; and that prospect is already prompting savers to shovel their money offshore.

经济疲软、准固定汇率和漏洞百出的资本管制这几个因素让中国经济动荡不已。宽松的货币政策将提振内需，但也会打压人民币。人民币贬值预期已促使储户将资金转出中国。

In the last six months of 2015 capital left China at an annualised rate of about $1 trillion. The persistent gap between the official value of the yuan and its price in offshore markets suggests investors expect the government to allow the currency to fall even further in future. And, despite a record trade surplus of $595 billion in 2015, there are good reasons for it to do so, at least against the dollar, which is still being propelled upwards by tighter monetary policy in America.

在2015年下半年里，资金以每年近一万亿美元的速度流出中国。人民币官方汇价与离岸市场汇价持续偏离，说明投资者预期中国政府将允许人民币在后期继续贬值。尽管2015年创下5950亿美元的贸易盈余新高，但有充分的理由相信人民币将至少相对美元贬值（后者依然因为美联储收紧货币政策而走高）。

The problem is that the expectation of depreciation risks becoming a self-fulfilling loss of confidence. That is a risk even for a country with foreign-exchange reserves of more than $3 trillion. A sharply weaker currency is also a threat to China's companies, which have taken on $10 trillion of debt in the past eight years, roughly a tenth of it in dollars. Either those companies will fail, or China's state-owned banks will allow them to limp on. Neither is good for growth.

问题是人民币贬值预期可能让投资者本能地丧失对中国经济的信心，连一个外汇储备超过3万亿美元的国家都要承受这种风险。人民币急剧贬值也会危及中国公司，它们在过去8年里举债10万亿美元，约占其美元债务的十分之一。最后的结果不是公司破产，就是中国的国有银行让它们苟延残喘。不管是哪种结果，都不利于经济增长。

The government has reacted by trying to rig markets. The PBOC has squeezed the fledgling offshore market in Hong Kong by buying up yuan so zealously that the overnight interest rate spiked on January 12th at 67%. Likewise, in the stockmarket it has instructed the“national team”of state funds to stick to the policy of buying and holding shares.

中国政府尝试挖潜市场潜力，作为应对措施。PBOC大量买入人民币，挤压了初生的香港离岸人民币市场，导致隔夜拆借利率在1月12日飙升至67%。股市也是如此，中国政府指示国有基金的“国家队”坚守买入股份持有股份的政策。

One step back, two forwards

退一步，进两步                                                                                                 
Yet such measures do nothing to resolve a fundamental tension. On the one hand, the state understands that the lack of financial options for Chinese savers is unpopular, wasteful and bad for the economy. On the other, it is threatened by the ructions that liberalisation creates. For Xi Jinping, the president, now in his fourth year in charge, that dilemma seems to crop up time and again (see Briefing). He needs middle-class support, but feels threatened by the capacity of the middle class to make trouble. He wants state-owned enterprises to become more efficient, but also for them to give jobs to the soldiers he is booting out of the People's Liberation Army (see article). He wants to“cage power”by strengthening the rule of law and by invoking the constitution, yet he is overseeing a vicious clampdown on dissent and free speech.

但这些举措未能消除基本面紧张局势。一方面，中国深知：针对国内储户的理财渠道不足是饱受诟病，浪费资源，也不利于中国经济；另一方面，自由化导致的骚动又危及中国经济。今年是中国国家主席习近平执政的第四个年头，这种困境似乎是反复出现（详见简介）。他需要中产阶级的支持，但似乎忌惮中产阶级的惹事能力。他希望提升国有企业的效率，但也要求它们为裁掉的中国人民解放军官兵提供就业岗位（详见文章）。他希望强化法治倡导宪政，从而“将权力关进制度的笼子里”，但又监督和邪恶地打压异议和言论自由。

It is easy to say so now, but China should have cleaned up its financial system and freed its exchange rate when money was still flowing in. Now that the economy is slowing, debt has piled up and the dollar is strong, it has no painless way out.

做事后诸葛亮是很容易，但中国确实应该在还有资金流入的时候清理自己的金融体系，放开汇率。现在经济增长放缓了，债务高企，美元强劲，要想走出困境必须付出代价。

A sharp devaluation would wrong-foot speculators. But it would also cause mayhem in China and export its deflationary pressures. The poison would spread across Asia and into rich countries. And because interest rates are low and many governments indebted, the world is ill-equipped to cope. 
人民币的大幅贬值使投机者措手不及，但也会让中国陷入混乱，对外输出通缩压力。这种困境将传导至整个亚洲及富裕国家。鉴于利率处于低位且许多国家都负债累累，全球将无力应对这种局面。

Better would be for China to strengthen capital controls temporarily and at the same time to stop stage-managing the yuan's value. That would be a loss of face for China, because the IMF only recently marked the yuan's progress towards convertibility by including it in the basket of currencies that make up its Special Drawing Rights. But it would let the country prepare its financial institutions for currency volatility, not least by starting to scrub their balance-sheets, before flinging their doors open to destabilising flows. Mr. Xi could embrace more complete convertibility later, when they were less vulnerable.

理想的情形是中国暂时强化资本管制，同时停止对人民币汇率的幕后操控。这会让中国很没面子，因为IMF刚刚将人民币纳入其特别提款权一揽子货币，表彰人民币向可兑换迈出的一步。但会让该国的金融机构为货币波动做好准备，尤其是在猛然开门让破坏性资金流入中国之前着手清理自己的资产负债表。习近平可以在人民币不再大幅波动时，稍后推行完全可兑换政策。

One reason the PBOC is rushing towards convertibility, despite the risks, is that it feels that it must seize the chance while it has Mr. Xi's blessing. But better to retreat temporarily on one front than to trigger a global panic. That might also lead to some clearer thinking. There is a contradiction between liberalisation and party control, between giving markets their say and silencing them when their message is unwelcome. When the time is right, China's leaders must choose the markets.

尽管风险重重，PBOC依然加速推进人民币的可兑换，原因之一是它感觉必须在习近平赞同的时候抓住机会。但最好还是暂时撤退，而不是引发全球性恐慌。这也可能让我们稍稍理出头绪。自由化与政党控制之间存在矛盾，发挥市场的力量与市场传递出不良信号时抑制市场之间存在矛盾。待时机成熟，中国领导人必须选择发挥市场的力量。