Ding Hu Economic and Financial Theory Collected Works

Author: Ding Hu
Publisher:
Publish Date: 2002-10-01
Features: Regarding the sources of speculative capital, its reasons for increase, and its relationship with speculation, as well as the possibility and pros and cons of its internal migration, the author has previously attempted to analyze these aspects in his work "Shanghai Speculative Capital Issues." General opinions on the above points tend to be more consistent regarding the possibility of internal migration, while there is disagreement on the pros and cons of migration. Here, the author will discuss the various opinions on this aspect.
Those advocating for the internal migration of speculative capital appear to fall into two main groups. One group advocates for a wholesale internal migration without distinguishing the nature of the capital, while the other only transferring substantial capital, believing it can effectively address the issue of speculative capital. These proponents' arguments can be further categorized into the following three types:
The first type of argument holds that there is an abundance of speculative capital in Shanghai, which would be a waste to leave unused, while the hinterland is suffering from a shortage of funds. Therefore, transferring the surplus to the hinterland can not only stabilize the Shanghai market but also develop local industries.
The second type of argument suggests that maintaining the credit of the legal tender system relies on exchange rates, and the stability of exchange rates depends on the tightness of the financial market. Thus, it is necessary to migrate speculative capital.
The third type argues that much of Shanghai's speculative capital has already shifted its focus to hoarding goods, leading to rising prices in Shanghai. This, in turn, will inevitably drive up prices in the hinterland. To directly curb inflation in Shanghai and indirectly help stabilize prices in the hinterland, it is advisable to encourage the internal migration of speculative capital in Shanghai.