 Hello and welcome to the latest Lowey Institute online event. This is part of what we're calling the Long Distance Lowey Institute of online events while we can't meet in person. I'd like to welcome all those joining from Australia, including our board members and corporate members and the many from overseas as well. The Chinese economy is a popular topic. We've had more than a thousand people register for today's event. My name is Richard McGregor and I'm a senior fellow at the Lowey Institute. Joining me this afternoon is Huang Yiping, Xu Xiaonian and Wang Jiao, all three distinguished economists in their own right. You can see their longer CVs on our website in brief. Dr Huang is from Peking University, Dr Xu is from the China-Europe International Business School in Shanghai and Dr Wang is from Melbourne University. I might say we're still trying to get Dr Xu on the line, but we're going to start anyway. Before I go on to our guests, just some quick housekeeping. At the bottom of your screen you'll see a Q&A button where you can submit questions to the panellists. We'll put as many of your questions as possible to the panel later in the discussion. Please include the name of your organisation or any other affiliation when you send through your questions. But let's make a start now. Dr Huang, I'm going to go to you first. You would have seen that in April, I think the IMF said that of the major economies on the China, along with India, is expected to record growth in 2020. What's your outlook? Is that realistic? Do you think in your judgement the Chinese economy will manage to grow this year? And why do you think that is? Well, I do think that the economy is recovering very slow at the moment. And a genuine expectation, I think, of an economist in Beijing at the moment is that growth will be likely between two, three percent. But this is a very highly uncertain, as you know. The contouring of the pandemic is still very dynamic process. What we see in China at the moment is domestic activities start to recover, but still affected by the bursting of the new confirmed cases, but also the hurting of the export orders and so on. So it does look like the economy is recovering. We don't yet see the second quarter GDP numbers yet. The first quarter GDP growth was negative 6.8 percent. So if, as expected, we see a gradual recovery of economic activities in the second, the third and the fourth quarter, then my expectation is that we probably could see something around two percent. But as I said, this is a really very uncertain, depending on what happens. Number one, on the domestic situation of the pandemic management, but also to a large extent what happens to the rest of the world. We have coastal economy, for instance, migrant workers all coming back to their factories in the coastal cities to restart business. But then the manufacturers, the factory owners receive the cancellation of the export orders, and that might not return very quickly. So it will be a very slow recovery in my view with lots of uncertainties. One of them, you talk about the export economy as a variable there, but China is not really an export-led economy anymore. But is this a moment when China's exports are going to be more important? Well, export is more important. So for instance, you look at the domestic economy. We just have done a research on these offline small vendors, these like self-employed and the street-side stores. We use the adi-babas, adi-pay offline QR code payment services. Basically, through the offline payment, you can see how many businesses are operating. We actually collected the data for close to 100 million small vendors around the country. What you found was there was a significant downturn of the businesses in February by something like 50 percent. In Wuhan, in Hubei, the business was the app center. The business was done by 70 percent. But then after the end of February, businesses started to recover. However, they recovered back to the level of 80 percent of what we think it should be, and stayed there. It's not going back significantly. So this is the one thing we are seeing, activities remain soft. The problem with the export, as you said, it didn't really control much in terms of net exports, exports minus the input. But what we find at the moment is the coastal economy, which is still very much dependent on the export, the Yangtze River Delta, the Pearl River Delta, and so on. These are the manufacturing centers driving the economic activities. Because export orders are pretty soft at the moment, it's causing problems for these most dynamic regions. Okay. Thank you, Dr. Wang. I'll ask you now, I mean, many companies in China, many SOEs, many private firms, as Dr. Huang said, many property developers. Property is a big driver of growth in China have basically had their income collapse or diminish by a large amount. What kind of stress does that put on the financial system? Thank you, Richard. I think this kind of outbreak of the pandemic does put a lot of the pressure on not only the small firms, but also the large firms. But we do see the accommodation of monetary and fiscal policy since as early as February coming in in supporting of the recovery and rebound of the economy. And when we look at the data in June, which is coming in this week, there are a few highlights which shed light on how the economy is recovering in terms of the financial sector. We do see a higher than expected growth in the total credit by about 30 percent. And the new bank lending jumps by more than 22 percent in June. And this makes the overall bank lending in the first half of the year reach the 12 trillion yuan, which is a record high level. So to quote the central bank, the People's Bank of China governor, if we have a cap on the new loan lending, which could be nearly 20 trillion yuan, then one possibility is we see a slowdown of the bank lending in the second half of the year. But the another possibility is we could continue to see a higher new loan growth in the second half of the year, which will exceed the 20 trillion yuan. And all the other activity indicators such as retail sales and industrial production and manufacturing purchasing manager index also show signs of the great also signs of positivity and warm up of the economy. So if all of the financial including monetary and fiscal stimulus goes into the real sectors and the financial sectors, then that will release to some extent the pressure on the big and small firms for now. OK, that's great. Dr. Xu, can you hear me now? Are you there? Oh, yes. Yes. Yes, I can hear. Yeah. Sorry for joining you so late. No problem. I'm thrilled to have you. There was an event the other day with the former Australian Prime Minister, Kevin Rudd, talking about the Chinese economy. And he said China faced a basic big choice between an old fashioned stimulus or unleashing the spirit of 2013, in other words, making markets the decisive factor in the Chinese economy. Is that the kind of choice you think China is facing? An old fashioned stimulus or a new bout of reform focused on the private sector? To some extent, yes, I agree with him. People talking about the old fashioned fiscal and monetary stimulus. I don't think it's going to fix the problems facing the Chinese economy today. Monetary easing as an example, the bank credit, most of the bank credit, flew into the state sector rather than the private economy, and the small, medium sized enterprises still lack of credit and liquidity, and there are traditional environment getting worse and worse. So without the structural reforms, I do not think the things in type of monetary or fiscal policies are going to work. So I urged the decision makers in China to pay more attention to reforms rather than the stimulus. Is China constrained, Dr. Xu, on the stimulus of 2008, 2009? There's obviously a buildup of debt in the system. Has that constrained, does that constrained policymakers today, as they address an even sharper downturn? It is. It is definitely a constraint, definitely. Even though we don't have reliable numbers to show how tight that constraint is, but by anecdotal evidence, I think fiscal stimulus, there's not much room to go further. The debt level, I think the most recent debt level, a number regarded from BIS is quite high. It's 260% of GDP or even higher than that. So definitely it is a serious constraint. So I'll just come back briefly to Dr. Wang on that point, Dr. Wang. You talked about the growth in credit and perhaps what might happen later in the year. Do you agree most of that growth in credit is going to the state sector as opposed to the private sector? I think the short answer is it is a great possibility. The reason being, we have had several rounds of fiscal stimulus since the global financial crisis. Most primarily the one during the global financial crisis, of course. And then there was another one in 2012 and then another one in 2018. So the transmission from the fiscal and monetary stimulus towards the larger forms are more effective and prominent than the ones to the private ones. Of course, there are issues in terms of the identifying and getting through the transmission mechanism from the provision of credit and the liquidity towards the private firms. There are a number of reasons for one, the size is small, they are not available information on their balance sheet, et cetera. But on the other hand, there is a preference in the large banks and financial institutes to go automatically towards the large firms. That is why the pressure on the private sector, especially the small and micro business are much larger in this time of the crisis. And the building on that is the uneven impact of the COVID-19 on the small firms and disadvantaged groups of businesses as well. Okay. I'll go back to you, Dr. Bong on a similar theme. The sharp downturn, of course, this year brings as you know, prompted many people to revive their fears or predictions of a financial crisis in China. The counterargument to that is China's massive savings rate. In other words, if you might have very many poor quality assets, but your liabilities overwhelm that, what's your view on that? I mean, is China's savings rate still its saving grace, if you like? And how long can that last if corporate profits go down for number one when you have an aging society? Give us your perspective on that in the current circumstances. Well, I think the overall macro picture is changing. If you look at what happened after the global financial crisis, the composition of the economy is changing quite rapidly. Number one, export dependencies are down. As you mentioned earlier, export, net export is no longer a major drive of economic growth. Investment ratio is also gradually coming down. Household saving, interestingly, we start to see some changes as well. Although during the latest pandemic, household saving ratio actually went up a bit, but that's because of uncertainties imposed. But overall, in the longer term, I think we should expect the saving rate to go down continuously. The kind of a saving rate we saw in the early decades, like about 50% of GDP, that's not sustainable. And a couple with what you just mentioned, the aging of the population and so on, I think we should expect that to go down further. What becomes more worrying is not so much about the saving is diminishing over time. That should be expected. What I think makes me a bit more worried is that the investment efficiency is declining. So we have a measure of the so-called incremental capital output ratio, which basically measures how many additional units of capital input you need to produce one additional unit of GDP. The number was 3.5 in 2007 and now above 6, which means for to produce the same unit of GDP, you need a lot more units of capital to do that. That is why I think that we needed to do something. And in that regard, I agree with Professor Xu Jianye and also Prime Minister Mr. Kevin Ratt that we really needed to count on the market-oriented reform to deliver on the efficiency gains over time. So it's not to me. It's not so much about how much is saving per se. The question is how more efficiently can we use the capital? The last point, I want to differ a bit from Professor Xu Jianye's argument. I think there's no disagreement that China needs to have much more aggressive market-oriented reforms to increase efficiency to sustain economic growth. In fact, there was one big blueprint announced at the end of 2013. It's about making market forces as the decisive mechanism, allocating resources. A lot of people, including myself, became very optimistic about the future of reform. But I have to say honestly, during the last seven, eight years, the progress was far less than what we expected. So we needed to do more. That's the point I want to echo what Professor Xu Jianye said. Where I want to depart a bit is about the short-term stimulus policy. I do think we cannot count on fiscal policy to drive growth. But when the economy is hit by a sudden shock, the pandemic, the economy was declining by 7% year on year. What do you do? I think this is the time when you need to utilize the fiscal and monetary policy to stabilize growth. This is why I certainly would support the fiscal policy and the monetary policy to do the job. Unfortunately, the fiscal policy is expanding if you look at the fiscal deficit and also the other borrowings as well. The problem is, I think my view is actually the fiscal policy is still too conservative. It's too conservative. Therefore, the government has to rely a lot of the jobs and responsibilities on the financial institutions. As Wang Jia just mentioned, the financial institutions extending lots of loans. Why? The economy is taking a downturn, banks are giving out more loans, and you had a question about whether the loans actually went to the SOEs or to the private enterprises. I don't have the exact number yet, but you saw the government had a very clear requirement to asking the banks to extend more loans to the SMEs because the SMEs are hard hit. You mentioned about the financial difficulties by property developers and other large corporations, but SMEs are really hard hit because they have very limited cash flow reserves and they're having difficulty time. The government does not have a lot of fiscal ways of supporting these SMEs directly. Therefore, they ask the banks to support, which I think is okay if that's the only thing you have to do. But the problem is, this is a very much policy-oriented landing and if the government is not going to take the cost of such a landing, we are going to see bigger problems going forward and we don't have a good plan at the moment. So I'm not against this landing more money into SMEs, but if you don't have a good plan of how to resolve the potential non-performing loans in the future, that couldn't be a problem. Dr Wang, on that subject of stimulus, as you know, you're in Melbourne, people in Australia get very excited with the talk about a stimulus in China because Australia in the past has done very well out of traditional Chinese stimuluses. And you can see a little bit of that at the moment in iron ore prices, which of course flows directly in the form of taxes into the Australian budget bottom line. What's your impact? What's your view, do you think at the moment of the impact of China's economy on the Australian economy? And of course, part of that story is the very bad bilateral political relations between Australia and China, which has caused the imposition of some trade barriers. What do you see in the economic story of China for Australia at the moment? I think there are good news and bad news in terms of the impact of the Chinese economy, whether how strong it will recover on Australia. So the good news, as you mentioned, Richard, is whatever the fiscal stimulus policy will be, a large chunk of that will probably go to the infrastructure and properties. So that will, of course, stir up the demand for commodities and stir up the steel production. Of course, that will be the demand for bulk commodities. And Australia has been benefiting that in the past, most recently in 2018. So we are likely to see the materialized effect of that, which is a strength in the term of trade and the increased commodity export, of course. But the bad news are also enormous. For one, the current effect, the current border control and the restrictions has taken the toll on several sectors, including the tourism, the housing market, both residential and rental markets. And another sector which has been hit hard is the higher education sectors in Australia as well. The restriction on the movements has delayed a lot of the enrollment and the coming back of the international students. The majority, a large share of them are from China. So the higher education sector has been another loss barrier of the pandemic initially started from China, of course. And as you mentioned, the frictions on the international and the political matters, it has and will continue to cause some temporary setbacks of the businesses and the trade. I'm not really a political economist, but I think the bilateral close relationship between Australia and China has proved repeatedly that it is mutually benefiting to two countries, to both countries if we ensure a smooth and politics-free exchange of businesses and trade. So I would encourage the two national leaders to work on the political issue aside from the economic channels of the two country and to make sure that more good news will come in to Australia from China. Thank you. I guess the two national leaders aren't really talking to each other at the moment, so we'll have to wait for that to happen, but that's for another day. So I want to come to you. I'm gonna come back for all of you to the international dimensions that Dr. Wang talked about, but Xi Jinping, another question for you. It's no secret to put it politely that China has had a big re-centralization of political power under Xi Jinping. How does the re-centralization of politics in China affect economic policy? Um, re-centralization, this is a very tough question. Richard, you direct that question to Mia. I mean, it's a strong people say that there's greater support for SOEs at the expense of the private sector, a consolidation of big SOEs. In other words, bigger industrial groups. How does that affect economic policy? In the past a few years, we have seen a move, we call it in China as the state of mancy, so well, where the private sector retreats. So this is a general trend in the past a few years. If you take that as a consequence of re-centralization of power, I would agree with you. And that is not an improvement of the efficiency of the macro economy. And we hope we can stop that trend and reverse it to the direction set up by Mr. Deng Xiaoping 40 years ago. So economic policies, I agree with Dr. Huang. We should launch more market-based reforms rather than rely on the state sector for economic growth and social stability. But unfortunately, I don't see any sign of the policies of moving in that direction, which is very unfortunate. Okay, fair enough. I want to go to the issue now of employment, which is a subset of what we're talking about. In the work report when the NPC was convened late in May, China had no official growth target for this year. But informally, I think China does target employment. Unofficial estimates of unemployment in China now are 20%. And the unemployment problem is not just about blue-collar workers or migrant laborers. It's also about graduates who've invested a lot of money in their education. Dr. Huang, how is China targeting employment? Or what programs do they have been for employment? Because eventually, if this goes on too long, it obviously has implications for social stability. Sure, well, obviously, we all know the best way of ensuring employment is to quickly restart the economy. And this is why I think you look at the local government all across the country trying very hard to restart the businesses at the same time, obviously, controlling the pandemic, which is also very important. I don't have a very good sense of the true unemployment rate. And you mentioned that number. Somebody mentioned similar numbers. If you look at the so-called surveyed urban unemployment, it's slightly above 5%. That's not too far away from the government target. The problem with that data is you only get the number of these people, you get chance to talk to them What I think happened in these numbers is that we have a lot of migrant workers who came back to the cities after the Chinese New Year, but just discovered that the factory had to be shut down again because of the lack of export for the orders. So some of them went back home and these people are not counted as unemployed. In a way, this is the reason that the problem derived from the so-called household registration system and the lack of universal social welfare system. If you lose job in the cities, you have to go back home and that's the only way to survive. So it's not very fair system. But on the other hand, it provides some kind of social cushion because if people stay in the city and don't have a job, we'll have actually bigger problems going forward. At the moment, the government is also trying to encourage the domestic employers to hire more people. And in fact, for instance, the reason why the government is so keen at the moment, supporting the SMEs and the private enterprises. And one of the main reasons is because now the private enterprises contribute something like more than 60% of GDP and more than 80% of the urban employment. That is why I think it's critical. What Professor Xu Jianying just mentioned, we should invest more resources supporting the SMEs, the private enterprises. They are the future of the Chinese economy. But otherwise, we don't have the policy systems you have in advanced economies like supporting employment, providing direct subsidy and so on. We do have an unemployment insurance system and so on. But the payout is relatively limited. So the social security system is still relatively underdeveloped. This is why I think growth is still very important. As you said, the National People's Congress didn't set an explicit target, which I think was a wise idea because giving the uncertainties about the global and the domestic pandemic situation, it would be unwise to just put down a number and that's the target we have to work towards because you don't know what is going to happen. So I think do not set an explicit growth target is a wise idea. But that doesn't mean growth is not important. Growth is important for income, but more important than, as you said, for employment. You can't create enough jobs if there's no growth. Dr Wang, I want to move on now. I think you're an expert on aspects of monetary policy. You've seen in the big Western economies lots of cheap money being injected into the system. We've seen in the United States quantitative easing or QE and the like. In China, I think there's been a debate about that very issue and some officials saying we're not going to have QE in China. Could you explain to us how the monetary authorities are responding to the crisis and how that differs from Western countries? I think the fact that the interest rate in China is higher, the policy rate in China is higher than the majority of the advanced economy is the foundation to understand the policy room of the People's Bank of China to vis-à-vis the central banks in the advanced economy for the US as well as Australia. We are now at the lower bound of the interest rate. So the room is quite limited for the RBA as well as the Federal Reserve to actually explore the transmission mechanism of the interest rate. That's why they have to go towards the quantitative easing side. But for the People's Bank of China, there was a history of reform in terms of monetary policy framework. We used to look at the growth of the broad money, the M2 quite a lot. But over the years, there were discussions, there were actions, and then there were movements in the reform of the monetary policy framework. And now as the reform proceeds, the room for implementing monetary policy increased quite a lot as well. But the common part of the People's Bank of China has been doing as to the other major central banks in the world are still the accommodative monetary policy. The monetary policy easing, of course, it costs the lending rate quite a lot. It lowers the bank reserve requirements a lot. And then it promotes the targeted lending to the virus affected the firms since as early as February. So in that aspect, it is the same in the nature for the monetary policy stimulus. But moving forward, there are more room for the People's Bank of China to move. It is still too early to me to actually use the quantitative easing. The other thing about the overall role of the People's Bank of China is it also has a role of macro potential regulator. So it's not just implementing monetary policy, it also needs to closely monitor the financial stability of the economy while working along with other regulatory bodies, of course, like China Bank and Insurance Regulatory Commissions. But one of the main tasks for the People's Bank of China is the financial stability. So I think on that aspect, there are things the People's Bank of China should do and needs to do in terms of maintaining the financial stability as well. For example, the fiscal stimulus going forward needs to be closely regulated and monitored. The People's Bank of China should require and observe the effectiveness of those fiscal stimulus when implemented by the local governments. So I think overall the monetary policy and the macro potential policy are the two areas that the People's Bank of China needs to implement and improve upon. And the quantitative easing isn't really a necessary thing for now. Okay. Dr. Xu related to that, the issue of the financial system. We had some bank problems in China last year, the Baobaoshan Bank and a number of other banks which were taken over by the PBOC. A rapid downturn will stress any financial system. Earlier we discussed the issue of savings rate and how that helps the authorities. Do you have any worries about stresses on the financial system and the authorities' ability to manage that? Yes, I do. I think the bank asset, the quality of bank assets, we can help you make an accurate estimate about the non-performance ratio. And total evidence suggests the actual NPL ratio is much higher than the numbers disclosed in the financial statements of these banks. So I think the near-term impact of the pandemic is the expansion of bank credit. And afterwards, maybe end of the year or next year, when the bank loans emerged, it could be a big problem for the policy makers and also for the financial stability of the country. But I guess you cannot do what you did about 10, 15 years ago and simply recapitalize the banks again. Can you have the same approach that you had at that time? Well, you can do that. But the capacity of the Treasury is limited as compared to 20 years ago. I think in the last time we recapitalized the large scale of the state banks was 2000 or around 2000. But with the debt level of governments today, all levels of government, I think we have less room to maneuver this time around. So it's going to be difficult. Maybe we have to depend largely on monetization. Other than that, I think the financial ministry would feel very tight to recapitalize these banks. Okay, I'll move on just to an international dimension now. US-China relations are very bad and getting worse. People are talking about a new Cold War, whatever you want to call it. De-coupling is another theme. Possible tech sanctions by the US against China. Pressure in other Western countries from the US to follow it on this. Just sticking to the economics, Dr. Huang, you first. Does the so-called new Cold War, does that have any serious implications for the Chinese economy? Well, of course. You think, look at the Chinese economy last 40-something years, the reform period. The economy was successful, in my view. It's simply because number one, reform and a number two, open door policy. You look at the contributors of China's economic growth at the macro level. Externally, the first was continuously expanding export market, which was a key driver of growth. And at the same time, FDI coming from overseas to China. And that was a big part of the story. So I often say China has been a main beneficiary of the globalization process. It coincided with the reform process, but China benefit. If this is going to change, I think there will be a lot of challenges, and especially with the US. I think, I mean, we start to see this problem more than two years ago. Initially, we thought it's probably lead to some kind of partial decoupling. Certainly between China and the US, we don't know the rest of the world yet. But today, I still think that decoupling is probably the base case. The only problem is how much. Decoupling could be 10% or it could be 80%. I certainly, looking from what is happening now, I think it's becoming increasingly more difficult. The degree of partial decoupling could actually be greater. And the other thing, I think, we should look at this. I mean, if the US want to go down this road, there's not much we can do. Obviously, China can try very hard to reach a trade agreement to deliver what was promised and so on. But a lot of policy uncertainties are beyond what we can even analyze at the moment. But my own recommendation, and I think the recommendation by most Chinese economists is that we should continue with the reform and open door policy. Maybe it becomes more difficult to continue to integrate with the US, but there is still a large rest of the world. But the problem, as you are very well aware, even this rest of the world is becoming somewhat very much uncertain. So it does pose a big challenge. Our school at the Peking University just completed a research with the Brookings Institution, David Dollar, called China 49. What will be the key challenges over the next 30 years? One of the big challenges we might not be able to count on the same kind of external market to drive Chinese growth. Then the question is, what should we do? My own sense is we still should open and reform. That's the only way to drive growth. But given that the external environment becomes so much more unfavorable. Number one, there is a big challenge, a question about what we should do in order to adapt to that external environment. And number two is, I think this provides more reason that maybe we should just accept the slower growth. Alongside other reasons, the economy is mature, then our GDP per capita is already above 10,000 US dollars. So we should expect the slower growth. But this is the new reality and the new normal, unfortunately. Dr Wang, on that issue, internationalization, there's a couple of things. We have one question from Hugh McFarlane of Macquarie University. Does this decoupling or the trend of decoupling mean less FDI into China? Does it have an impact on China's plans for renminbi internationalization? Would you like to comment on either of those two? Well, I don't... Dr Wang, sorry, Dr Wang. Oh, sorry, it's not for me. Or even you can answer first. I'm okay with that. Go ahead. No, I want to, in answering that question, I want to add to what you can just said. What I see in terms of the decoupling are several dimensions around that. Of course, the leadership style and the decisions matters a lot for the US-China bilateral relationship. So we will see more after this year what will the future choices of the US administration. And the other dimension of that is there are trends in terms of focusing on regions. And in that aspect, I think Australia and China can play a bigger role in strengthening the cooperation in the Asia-Pacific region. And we have reports coming already came out arguing for that. The third dimension is more on the private and business side, even though they are decoupling in terms of the national level in terms of political atmosphere, but the business level communication and the connections are still very close. And the businesses around the world, in China, in the US, and in other regions, they are trying to get around of all those unfavorable political decisions to strengthen their connections because the trade and the businesses have been going on a long time. There is no, it's not a rational decision for the business people to just follow whatever the politicians have said. So that's what I want to add in. As for the question about the internationalization of the IMB, I am a strong supporter of that. For one reason, the reason one is it should be associated with the economic side and the financial side of the Chinese economy. For another, the international monetary system needs urgent reform. We should reflect the international reserve currency system should reflect the current composition of the global economy, especially should increase the shares of the currencies from the emerging market economy. So I think whether or not the environment is favorable for doing that, there should be active roles from the leadership as well as from the central bank to push forward of the IMB internationalization. Okay, Dr. Xu, would you like to comment on the impact of decoupling and the big political trends on China? For example, I know that many of the students that you've taught at the business school in Shanghai have gone on to set up great businesses in China. Some of them using all sorts of cutting-edge technology applied to traditional industries and the like. What do you think the impact on the Chinese economy will be of US-China split? I think decoupling, the impact of decoupling will have a huge impact on the Chinese economy, in particular on the science and the technology front. Economy-wise, speaking of the real economy, it may be less so, but for development of scientific research and technological innovations, the impact will be sizable and visible, and you can feel it, okay? So we don't want to decouple it. We don't, definitely, okay? And I fully agree with Yiping about the university's report's conclusion. We should keep going on, opening up, no matter what United States is going to do. With Europe, with Japan, with Southeast Asia, okay? US is not the whole world, even though very important part of the world, but we can go with other countries. The economic achievement so far we have got in China, I can say is almost exclusively due to the reform and open-door policy, okay? Once we close the door, it's going to be disastrous for this country, okay? So we don't want to see that to happen, but it's not up to China, yeah? This is a bilateral, this is a multilateral relationship, and I do not agree with Professor Mia Scheimer on the inevitable confrontation between the number one and number two. I just don't agree, okay? It is possible to avoid confrontation between the number one economy and the number two economy. And in history, we have presidents, Germany under Bismarck successfully avoided confrontation with France, with United Kingdom, and why today we cannot do that, okay? So it requires, of course, both countries should have a political will to compromise, to find a solution, to settle the disputes, trade disputes, yeah, and other fronts. So I think the message I would like to get across is number one, the confrontation is avoidable, okay, between the United States and China, and number two, no matter what's going to happen, okay, on the US side, China should keep going on to carry out the open door policy. Thank you. Dr. Huang, you might want to comment on some of that, but I want to ask you a question as well. A number of our questioners from the audience have asked whether the current sort of the fiscal stress in China will have an impact on the BRI, the Belt and Road Initiative. What's your sense of whether BRI will be impacted by an economic downturn? If you want to comment on what your colleagues have said just then, please do so. Well, I mean, just quickly on the FDI question, I think that's something quite interesting because we are hearing a lot of relocation of the supply chain away from China. My sense is that that certainly was something that we should watch very closely giving the policy uncertainties. If you look at what is happening to the supply chain in China during the past decade or so, you'll find some relocation happening away from China either because number one, the cost of production is rising. Number two, the Chinese producers become a lot more competitive and so the foreign producers actually move that way. And the third reason is probably related to the trade war when the US imposes high tariff rates. If this stays, then it would make the Chinese production very competitive in the international market. So far you look at the relocation has been very limited in cases. People talk a lot, but we don't see a lot of actions. Maybe it's because it's too early to make a judgment. But one thing I think we all need to look at is that the Chinese consumer market could actually be the next most exciting global story. Economic story. China used to create two very exciting stories. Number one is about the exports of labor intensive manufacturing products and that's been gone. Number two is import of the commodities which benefited Australia certainly quite a lot. The next big thing in my view when China's GDP rises from 10,000 US dollars on the way to 20,000 US dollars, we are seeing the rise of the consumer market. Given that even though the Chinese consumer spending may actually slow as the GDP grows slow, but it probably will continue to be the most exciting market. This year the Chinese retail sales will exceed the US retail sales becomes the big consumer market. But at the same time, even with a slower growth, it probably will still be the fastest growing consumer market. This is why you are seeing a lot of Chinese producers now focusing on the domestic consumption. I think very soon foreign investors will also find very attractive to them. In fact, there was a survey recently, I think, by Japanese companies and they're looking at what their company is doing in China, whether they should look at relocation away. Their finding was 85% of the Japanese products produced in China were sold in the domestic market. That gives us some idea about relocation. If China has the most complete supply chain and your final product destination, then I think that's something we should keep in mind. Although I'm not simply discounting the risk of so-called relocation away from the supply chain for policy reasons, that's certainly possible. On the final question you just mentioned about the BI, I'm actually not an expert on BI, but I'm not sure if the fiscal constraint is going to become a big factor on the BI. If the investment or the spending alongside the BI is constrained for some reason, I think it will be reasons other than the fiscal policy because the fiscal burden, it is high. For sure, the continued liabilities of the government is already quite high in a way it would constrain what the government could do. But so far, the high debt burden is not yet affecting the government behavior, partly because, well, you have a central government which still has a reasonably approved balance sheet. I don't think that will be a key factor affecting spending. Okay, thanks. Now we're running out of time. I'm just going to ask Dr. Wang and Dr. Xu to give very brief answers to the same question. We've had a number of questions about, in Western countries, there's now priority given to politics and security over economics in many respects. You know, we're going through a different phase. And all of us here today have talked about the supporting reform and opening. But of course, there are groups in China for various different reasons who oppose that, be they sort of Neo-Maus or whatever. So Dr. Wang, what is your sense of the debate in very briefly inside China with pressure from the US of decoupling and the like, how will that affect the issue of reform and opening? Will it be dragged back? And Dr. Xu as well, just very briefly. Well, I think even the Xiao Nian is better positioned to other than they are in China. But from what I observed far away in Australia, I think the leadership has a clear idea of what they want for China for a long time. So it's not going to be easily affected by the current temporary or medium-term development in terms of the political environment. So I don't think it is a key disruption. Just to be brief. Dr. Xu, what do you think? Do you think there's always been forces favoring the state over the private sector? They might be strengthened right now in a fight with the US. What is your sense of the forces within China on that issue? I think in the near term, the nationalism as the populism in the States getting momentum seems to be stronger and stronger. But I do not think that too seriously. Once we see the consequence of decoupling, I think people maybe they're thinking we'll get back to normal. Your short slogan, it is easy for you to short slogan, but when you face day-to-day life and work, when you see the economy gets hurt and your life affected by the reverse direction of opening and reform, maybe you have a second thought about the ongoing nationalism sentiment. So I think the economy can educate the people in both China and the United States. So I wouldn't worry about that too much. Of course, I'm strongly against that momentum. That's fantastic. We've come to the end of our time. I really appreciate all of you coming on. It's not easy to organise. It's great to have voices from China and Chinese voices from Melbourne on this event today. There's a million things we could talk about. But I thank you very much and hopefully we'll do it again another time. Thank you.