Editor’s note: As the U.S. subprime mortgage crisis intensifies, the global economic situation faces greater fluctuations. How should our country respond to this global economic event? To this end, a reporter from the Financial Times interviewed the deputy dean of the w88 casino of Finance of w88 casinoDing ZhijieProfessor.DThe professor pointed out that the relationship between financial innovation and supervision should be properly handled. This interview was published in the Financial Times2008Year10month14日's "Financial News - Expert Perspective" section, and was reprinted by Sina.com. The full text is as follows:

The global financial crisis triggered by the U.S. subprime mortgage crisis will profoundly affect the future trend of the global economy. Therefore, any measures taken by the United States will affect the nerves of every economy in the world. So, what impact will this crisis have on China? To this end, our reporter interviewed the deputy dean of the w88 casino of Finance at the w88 casinoDing ZhijieProfessor.

Reporter: What impact will the global financial crisis triggered by the U.S. subprime mortgage crisis have on China?

Ding Zhijie: The United States is the economic and financial center of the world.. to2007At the end of the year, the debts of various countries to the United States exceeded20Trillions of dollars. No country will be immune to the collapse of the U.S. financial economy, but the extent of the impact will vary. The passage of the Emergency Economic Stabilization Act will help stabilize the U.S. financial market and prevent the subprime mortgage crisis from spreading to the real economy, which is beneficial to all countries, including China.

However, it should also be noted that the huge rescue fund raising has led to the US fiscal deficit, which may push up the yield on government bonds and suppress bond prices. At the same time, the bailout is equivalent to diluting the losses from the crisis from subprime mortgages to all bonds and even all U.S. dollar assets, which poses a challenge to the maintenance and appreciation of U.S. dollar assets.

Subprime mortgages belong to the United States, and the losses caused by the subprime mortgage crisis belong to the world. If other countries allow the United States to pass on the losses of the crisis, it may lead to irresponsible behavior by the U.S. government, which requires the attention of countries around the world.

Reporter: What kind of thinking does this crisis bring to China's financial innovation and financial supervision? How can China's future financial innovation and supervision path be more stable and better?

Ding Zhijie: An important reason for the subprime mortgage crisis is that financial institutions are unrestrained, irresponsible financial innovation, and abuse of asset securitization. The emergence of credit derivatives is a major event in the financial field, which allows credit risks to flow and be dispersed and transferred in the market. However, credit derivatives and asset securitization cannot fundamentally eliminate risks, and the expansion of participants makes supervision more complex, and the extension of the chain actually increases vulnerability.

Financial supervision is the cornerstone of maintaining the stable operation of the financial system. There are market failures, especially in financial markets, where information asymmetry is more prominent. If the market is left alone, the virtual economy will easily breed bubbles. In the history of modern economic development, financial crises always occur at regular intervals. The high debt and high leverage characteristics of the financial industry can easily cause a domino effect. Therefore, financial supervision must be strengthened to prevent financial risks.

Financial innovation and supervision are dialectically unified, and the relationship between the two must be properly handled. Financial regulation does not stifle financial innovation, but ensures that financial innovation develops on the right track, thereby making innovation a sustainable driving force for financial development. Many financial innovations circumvent regulation or occur in blind spots of regulation, thus placing higher demands on financial supervision.

Reporter: The economic structure of the United States is different from that of our country, and the economic development trends of the two countries are also at different stages. What benefits does this have for our country to safely weather this global financial turmoil?

Ding Zhijie: In recent years, China's economic structure is undergoing important changes, and consumption and investment have gradually become the main driving forces of economic growth. Maintaining stable and orderly development of the domestic economy and maintaining market confidence are prerequisites for China to safely weather this global financial turmoil, and are also China's contribution to stabilizing global finance.

Reporter: What losses may China suffer from this financial turmoil, especially banking financial institutions? What solutions should be sought next?

Ding Zhijie: China’s overseas assets exceed2.2Trillion dollars, reserves exceed1.8Trillions of dollars, a large part of which are U.S. dollar assets. The depreciation of the U.S. dollar and the depreciation of U.S. assets have caused overseas assets to face severe shrinkage.

International institutions that suffered heavy losses during the crisis have encountered liquidity shortages and may reduce their holdings of assets including those in China. Coupled with the contagion of market pessimism, this has intensified the volatility of domestic financial markets.

Reporter: With the gradual escalation of the subprime mortgage crisis in the United States, the housing loan market in various countries has attracted people's attention. Do mortgage loans in China have the same risks?

Ding Zhijie: Cyclical changes in the real estate market can easily trigger financial turmoil.20The banking crisis in the 1980s and 1990s and the current subprime mortgage crisis were both caused by the bursting of the real estate market bubble. China’s real estate market has also experienced a period of823003_23170

（Original link:http://www.financialnews.com.cn/jryw/txt/2008-10/14/content_150779.htm

Author：Gu Xiujun ）