Liu He, who will be China’s top economic policy maker over the next
fiveyears, gave his first public speech overseas on Wednesday at
Who is Liu He?: Mr Liu He has been viewed as President Xi’s top
economicadvisor since 2013, when Xi introduced him as “very important to
me.” He is alsoseen as the designer of the supply-side reforms that were
introduced inDecember 2015 and have had a significant impact on the
commodity space. Thatsaid, over the past five years Liu has largely
stayed behind the scenes. This is nolonger so. Last October he was
promoted to the 25-member Politburo, the party’stop decision-making
body. This March, he will likely become one of the vicepremiers during
the People’s Congress. He will also be a super-regulator,because he will
head the Financial Stability and Development Committee, whichwas created
last November to coordinate all financial regulators.
How to ruin a global brand
The signaling effect of the speech: Wednesday’s speech by Liu in
Davosmarks his debut in front of the world. This is even more meaningful
as lastyear it was President Xi who made the Davos speech. As such, we
believethis is meant to be a clear signal that Liu will be the
spokesperson for China’seconomic policy over the next five years, and
the market should hear manymore speeches and interviews from him in the
future. For the Davos speechitself, we have five takeaways.
简单说下适合普通英语学习者学习经济学人的方法 — 逐段精读。
1. Globalization: The most important thing for Liu at Davos, we
believe, is toshow China’s support for globalization, just as President
Xi did last year. Atthe beginning of his speech, Liu emphasized that
China stood againstprotectionism and would make its financial market
more accessible to foreigninvestors. Recently, we find that the risk of
a trade war between China andthe US has been clearly rising. Thus, we
believe it important for Liu tocommunicate well with the US president at
Davos, and this might be behindthe recent rapid appreciation of the RMB
against the US$.
Foreign students are going off English universities
2. Reform: Based on his past work, we find Liu to be a
reform-mindedtechnocrat who respects the role played by the market.
Davos is anarena for him to explain to the world China’s reform and
policy agendaafter the power transition last year. In his speech, Liu
told the audiencethat a new reform push would be introduced in 2018. We
believe it likelyto be at the 3rd Plenum this fall.
BRITAIN’S private schools are one of its most successful exports. The
children of the well-heeled flock to them, whether from China, Nigeria
or Russia: the number of foreign pupils rose by 1.4% in the last year
alone. One headmaster recently asked a room full of pupils whether they
flew business class to Britain. Only a few hands went up, suggesting
they were not quite as cosseted as he had thought. Then a boy explained:
many of the pupils fly first class instead.
Yet foreign students, whether educated in British private schools or
elsewhere, are decreasingly likely to go to English universities.
According to the Higher Education Funding Council for England, 307,200
overseas students began their studies in the country in 2012-13, down
from 312,000 two years earlier and the first drop in 29 years. Student
numbers from the rest of the EU fell—probably a result of the increase
in annual tuition fees in England from 6,000 (10,000) a year to 9,000.
But arrivals from India and Pakistan declined most sharply.
较于上一学年的 31.2 万人，在 2012-13 学年选择在英格兰大学求学的留学生只
有 30.72 万人，这是 29 年来人数首降。而且欧盟中其他国家的留学生人数也在
下降，极有可能是受到了英国每年的学费从 6,000 (10,000)增加到 9,000 的影
In contrast to the visa regime for private schools, which is extremely
lax (the Home Office counts private schools as favoured sponsors)
student visas have been tightened. Foreign students used to be allowed
to work for up to two years after graduating. They now have only four
months to find a job paying upwards of 20,600 if they want to stay in
This change was intended to deal with sham colleges that were in effect
offering two-year work visas. But it seems to have put off serious
students too. Nick Hillman of the Higher Education Policy Institute says
the government has sent unclear messages about the sort of immigration
it wants to restrict. An emphasis on holding down net immigration deters
young Indians and Pakistanis in particular. Australia and America, which
have more relaxed entry criteria for students, are becoming more
favoured destinations. Colin Riordan, Cardiff University’s
vice-chancellor, adds that Britain’s student-visa regime has become more
onerous and fiddly overall.
As a result, Britain is losing out to other countries in the contest for
talent—an oddity, given how often the prime minister bangs on about the
“global race”. Its unwelcoming stance will harm its long-term prospects.
And the drift of foreign students from leading British private schools
to American colleges may have another, somewhat happier, consequence:
America might become rather better at cricket.
3. Policy: Liu echoed recent speeches by President Xi, who put
curbing tailrisks as the policy priority this year. In his speech, Liu
vowed to fixChina’s leverage issue over the next three years, especially
in the areasof shadow banking and local government debt. As such, we
believe howfar deleveraging will go is the biggest uncertainty for
4. Risks: Economists always like to talk about risks. For Liu, other
than thefinancial risk domestically, the top risk this year is the
“spillover effect ofmonetary policy in large countries.” We believe he
clearly has the Fed in mind.
For the medium term, he lists asset bubbles, protectionism and
5. Themes: In his speech, Liu put quality over speed as his top
macrotheme. As such, he listed sectors that would benefit from the
theme, suchas intelligent drive, energy-efficient construction, new
energy and sectorsrelated to consumption upgrading. Lastly, he vowed to
continue supplysidereforms through cutting overcapacity.
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