Analysis of the financial crisis on challenges and opportunities to China's econ

Abstract. The current round of international financial crisis or the world economy is facing a sharp decline risk. Or the real economy has been or will face more severe impact. Under the background of the global financial crisis and the economic crisis， China has more opportunities than challenges. Crisis is a risk and also an opportunity. In the level of reform， there are still a large number of things to do. The proactive fiscal policy and moderately loose monetary policy should be flexible， prudent and coordinate. Then China can be invincible and make greater contributions to achieve our development goals for the long-term development and reform.

Key words： financial crisis； China's economic development； challenges； opportunities

1.Analysis of the bailout cost of financial crisis

In view of the world financial crisis， to get rid of the economic downturn and contrarian expansion of extraordinary provisions of the amount of loose monetary policy made by the monetary authorities， seem to be more in line with the need of getting rid of the crisis. However， from the effect of previous bailout policy implementation， this unconventional policy of “make bubble with bubble” cannot save the economy any more， but oppositely will cause bigger bailout cost， and ultimately hinder the economic recovery and result in the risk of high inflation. So at present all the countries must get out of this "unconventional" liquidity expansion policy and return to normal state as soon as possible.

1.1 Quasi-quantitative easing monetary policies hindered the process of economic recovery in the United States during the Great Depression

In the view of the history of the global crisis， the liquidity policy was not an effective tool rescuing for crisis， but turned out to be the culprit that kidnap the process of global economic recovery， the Great Depression in the 1930s was confirmed. In the late Great Depression period， the Fed adopted a loose monetary policy in order to combat deflation. On the one hand， it increased the base money； on the other hand， it cut the federal funds rate. From 1929 to 1933， the monetary base has increased by 20%. From 1929 to 1935， commercial paper rate declined from 5.9% to 0.8%. However， the Fed has increased the supply of base money， but due to existence of endogenous money supply， money supply （M1） declined by more than 25% at the end of the banking crisis in March 1929 to 1933. After the appreciation of the dollar， a lot of money invested in real estate and the stock market to seek opportunities for increasing the value. Due to this The United States domestic appeared rapid expansion of financial asset prices and the number， and after 1934 United States appeared more than 10% of high inflation.

1.2 After Asian financial crisis， the quantitative easing monetary policy also failed to make the Japanese economy out of the "growth recession"

The Asian financial crisis in the summer of 1997 was directly dealt a blow to the Japanese economy. In February 1999， in view of the major banks facing business crisis， the Bank of Japan cut down short-term interest rates for short-term financial markets induced target from 0.5% to zero， implemented the unprecedented so-called "zero-interest rate policy”.

Japanese reserve currency reached to more than 400 billion， and base money supply growth from the previous 10%to 20% after Japan's quantitative easing monetary policy， From 1990 to 2002， Japan's real GDP grew by about $ 0.5 trillion， while the capacity utilization was a serious shortage. In this 10-year period， the industrial operating rate to the 1980s were lower about 12%， but in the same period of industrial finished goods inventory were higher nearly 20%. In addition， if you simply calculated from the effective demand perspective， the Bank of Japan's ultra-loose monetary policy made negative growth in Japan about -3% every year.

1.3 The unconventional financial crisis bailout policy made the process of global recovery become more tortuous

For a long time， spam bill and issue huge national debt were the two major driving forces to the growth engine of the U.S. economy. So Dollar standard fact has evolved into a debt based system in the United States. At the end of 2008， the U.S. government， the total social security， corporate， personal， non-profit organizations whose debt have reached eight times of the gross domestic product （GDP）. U.S. budget deficit was about 1.47 trillion in 2009， made the size of the deficit accounted for 9.9% of GDP， respectively were 2.16 times in 2008 and 7.84 times in 2007， which was the pinnacle of the American deficit since 1945. The financial liabilities of the United States in 2009 totally reached to $ 12 trillion， accounting for 82.5% of GDP in 2009. Therefore， the Fed started quantitative easing monetary policy potential intention is to greatly expand the balance sheet of the monetary authorities， monetized fiscal deficits to offset the cost of debt again. In this sense， the United States does not fear inflation； instead it may be the biggest beneficiaries of this global crisis.

2. Chinese economies go to a new step in the

future five years

Macroeconomic trends always are not open around topic for an economist. PMI in October over the same period of previous increased 50.2%. "PMI composite index is a forward-looking indicator， representing the surveyed purchasing managers' judgment for the future economic growth situation. In October， PMI data rise again and return to above the critical point after felling in five months and even for two consecutive months below 50%， this sends a signal that the economy has shown a trend of expansion in the fourth quarter，

However， return to basic economic theory， short-term growth can rely on labor and capital inputs. But when ratio of input and output appeared decreasing returns to scale effect， if break through the bottleneck it must rely on technological progress and institutional progress， then at a higher level to promote the new and effective scale incrementing. While for Chinese economy， it is should form a new reasonable growth structure， "if there is a good guide， the huge demand for the service and consumer market will become one of the highlights of the future industrial structure， the clean energy industries and other strategic emerging industries which developed are in accordance with the industrial laws， will also be the highlights of future rational industrial structure.”

Analysis from the world economy and dynamic environment， it is a rare opportunity for China's economic transformation. Especially when the developed economies are vulnerable； this provides an active restructuring and adjustment＼ space to the Chinese economy. From the dynamic changes to see， new pattern of global economic rebalancing may not be related to the pre-crisis .it need forward-looking concern about the changes in the international and domestic economic environment， and look squarely at this stage of China's economic characteristics and contradictions. Therefore， you can not over-tangle short-term economic growth rate， it should take advantage of the timing of the restructuring and adjustments. If transition of China's economy is smooth， Chinese economy is able to get out of the bottleneck and go to a new step in the next five years.

3. "period of strategic opportunity" is still in China's peaceful development of foreign economic policy period

In 21st century， China’s total economy is the second largest in the world； it is fully participating in economic globalization and regional cooperation and deeply involving in international affairs and global governance， becoming important factors affect the changes in the world situation and international relations.

China's peaceful development will not be at the expense of their own national interests and territorial security and maritime rights and interests， while China will also let the outside world to believe with our wisdom that China is all the strong rely for global economic development and world peace and stability in the past， in the future.

The judgment of the external environment and the principles of peaceful development determine China's foreign policy is "unchanged” or "change". "Unchanged" reflects the foreign policy of peaceful development， "keeping a low profile" principle has not changed， priority to the interests of the sort of economic development has not change， and the United States for the most important diplomatic priorities also has not changed.

4. More actively involved in the international community

In fact， China is more active cooperating with the international society， and join forces to stimulate the economy after the financial crisis， Chinese economy was the first going out of the doldrums and become a global economic stabilizer； China participated in global governance reform， urged the a harmonious world's international order with developing countries； through the platform of the Group of 20， and in the reform of IMF representation making the influence in international affairs significantly increased. Seize the bond of interest to take care of each other， and to promote mutual understanding and trust， these become the Service to establish long-term stable and healthy development of relations between the major powers. The face of various external pressures in the new period is a double-edged sword， solving puzzles exercise the ability of China goes to the international. Actively participate in international peacekeeping， send international youth volunteers and medical teams， carry out overseas education cooperation Confucius Institute， and so on， all these initiatives won reputation and trust， create a good external environment for China. For ensuring build a moderately prosperous society by 2020， China is more need for a peaceful and stable international environment in future. In the next decade， China whether has a difference for foreign or not， and how to make a difference， are challenges for the new leadership and also are major opportunities for the future.

5. Sino-EU relations and economic development forecast

Disputes occurred frequently in trade that is really hurt feelings for the Chinese people who regard friendship as importance. Europeans， on one hand， throw a punch constantly crack down on China's export， on the other hand， spared no effort to “demand money” in China "， they not only required China to rescue the Euro zone generously with money， but also make every effort to attract huge investments from China. It seems unreasonable.

It is the representation of government lack of contact between policy-making and political aspirations on basically. Coordination between the different economic policies and political vision is necessary. Trade disputes not only occurs between the friendly nation ， but also occurs in a variety of economic relations， as long as it can be resolved within the law， it should not affect other aspects of bilateral relations.

Since 2003， the total trade volume between China and the EU continue to refresh the historical record， Sino-EU trade exceeded 500 billion U.S. dollars for the first time in 2011. From January to September in 2012， Sino-EU bilateral trade amounted to $ 411 billion.

From the European point of view， the sovereign crisis may be wave resurgence， the competitiveness of euro area crisis countries and neighboring countries is fatigued and weaken， the way of economic recovery is hard. In this environment， it is difficult to make people hold optimistic mood to the trade conflict. The future of the bilateral relationship quality， to a great extent， depends on China and Europe its own economic reform scale. It also determines next ten years both sides have how much degree of coordination in the policy.

6. To deal with the manufacturing crisis through market-oriented cooperation

First to see a group of such data： the third quarter of 2012， China's GDP grew 7.4% year-on-year. This is the lowest economic growth data since the 14 quarters start from the second quarter of 2009. Enter the fourth quarter of 2012， with the CPI remained low； the number of economic data is also getting gradually warmer. In October， the official PMI was 50.2%， and finally returns to the ups and downs above the line. With the early accumulation of macroeconomic stimulus effects appear， and enterprise to the inventory cycle is drawing to a close， integral number of new orders for the manufacturing sector finally appears good sign， production and employment conditions could be improved in a short term.

First from the whole， the current of China's manufacturing industry "external trapped" embodied in the following three aspects： First， under the global economic crisis， as a "world factory" of Chinese manufacturing industry especially feeling chill， export order to reduce， trade friction and shrinking markets become affect manufacturing growth adverse factors. Second， the European and American developed country for out of the crisis， boost the economy， they are aiming to domestic manufacturing industry， put forward to industrialization strategy， it is worse to the "big but not strong" of Chinese manufacturing industry. Third， a new round of global manufacturing changes are on the rise， meanwhile in Europe and the United States and other countries to attract outside industry "back to the nest"， southeast Asia are at much lower resources advantage become industrial transfer destination.

Unlike the stated-owned manufacturing to excessive investment and extensive production， the private manufacturing enterprises had to “part from localization and manufacturing”. Over the past ten years， China manufacturing industry average profit rate is 3.2%， and it’s a big gap to the real estate industry and more than 20% of the profit rate. Derived by short-term speculation and arbitrage opportunities， the industrial capital is inevitable to evacuated manufacturing， and formed a "demonstration effect". Since investment overheat and resource elements to excess capacity "bubble" in one side， in the other side， because of super cooling business environment lead to premature "to industrialization" landslide， then the best solution is to combine the two through the way of market cooperation and competition， and so as to speed up the reform of state-owned enterprises privatization process

In this way， the state-owned manufacturing enterprise can not only transfer the surplus， the backward production capacity to the lack of productivity of the private economy， to resolve serious backlog of inventory， still can use private enterprise to greatly pull employment， improve the efficiency and stimulate innovation consciousness， break the "production， pin， battalion， canal" long-term curing lock. Private manufacturing enterprise can not only enjoy the due national finance， monetary and industrial policy support， with the aid of the science and technology research and development resources to activate their own innovation ability， but also can learn the introduction of modern enterprise system， to promote the reform of the state-owned property rights diversification， achieve economies of scale.

7. China's foreign trade imports overall contraction

2012 is a very difficult year of China's foreign trade development. Due to the continued escalation of the European debt crisis， the global economic recovery is weak， slowing growth in emerging economies， the U.S. economy also appeared signs of slowdown and the whole external economic environment is deteriorating. In China， because of weak domestic demand， manufacturing industry downturn， investment contraction， excess capacity， and the government macroeconomic policy and a series of reasons， economic growth turn to slow down. Affected by this， the foreign trade import situation overall contraction this year.

Since the beginning of this year， China’s trade in goods import continues to maintain growth， but growth appear quickly dropped， from January to September total import value reached 1.3471 trillion U.S. dollars， a growth of 4.8% year-on-year， the growth rate was significantly below last year's level of 26.7%. Especially in the last two months， the sharp decline in import growth， the value of imports fell 2.6% year on year on August， on September； the increase in imports was only 2.4%， significantly lower than the first half year of the level of growth.

7.1 Domestic economic growth is slowing and effective demand is insufficient

This year， the decline in domestic investment and consumption growth， economic growth is obviously slowing down. The first quarter GDP growth fell to 8.1% from 8.9% in the fourth quarter of last year， fell to 7.6% in the second quarter， further reduced to 7.4% in the third quarter， create the lowest record in the past three years.

7.2 The weak growth in processing trade export and decline of utilizing foreign capital has weakened the pulling effect on imports

January to September this year， China's foreign trade export growth rate was 15.3 percentage points lower than the same period last year， exports of processing trade grew by only 3% over the same period last year， resulting in parts and raw materials for export import demand continued to weaken. China's processing trade imports growth of only 0.9% in January-September， the processing trade import growth even experienced negative growth in August， down 1.4% year on year.

7.3 International commodity market is in the downturn， the import prices dropped

2012， due to the European debt crisis continue to simmer， the global economic slowdown， sluggish demand， international commodity market prices somewhat lower than in the previous year. By September 2012， the global commodity price index （IMF） fell by 0.7% compared to the beginning of the year， a decrease of 0.8% over the same period last year， including energy commodities rose 3.4%， metal goods decreased by 19.7% year-on-year， industrial agricultural raw materials decrease of 17.2% year-on-year.

8. Summaries

According to the latest figures， China's third quarter economic growth continues to accelerate. September fixed asset investment， industrial output and total retail sales increase synchronization. The entire third quarter， GDP growth is slowing compared to last year， down to 7.4%， and generally consistent with the expected data. But if calculated on a quarterly growth rate， the growth rate has improved， representing an annual increase of 9.1%， more than the 7.5% growth target set for the year. Since the beginning of the first quarter of this year， China's economy entered into a soft landing. Despite huge international resistance from developed countries， and sometimes even with strong destructive， overall economic growth still maintain a relatively stable high speed. In the context of the global economic crisis， economic overheating but mean more serious challenge， far less smooth deceleration of the economy， because the deceleration economies can react flexibly to global market signals， while continuing to maintain long-term stable growth prospects.

References

[1] Wang YiJie. Dealing with the international economic crisis and promoting China's economic steady development [J]. Beijing observation. 2009 （04）.

[2]YAO Yang.China Development Mode and Present Economic Crisis[J].Journal of Chongqing Technology and Business University（West Forum）， 2009（04）.

[3]CUI Wei.Scientific Management and Control： A Theoretical Framework of the Approaches to China’s Current Economic Crisis[J].Journal of Shandong University of Science and Technology（Social Sciences）， 2009（03）.

[4] http：//.cn.