*Dr. Shi Heling (a world-renowned Chinese economist and professor of economics at Monash University in Australia) is a specially invited macroeconomic advisor to GMT Markets. The editor will conduct regular interviews with Professor Shi to summarize and summarize his views and perspectives on the financial market for readers, and publish them in the GMT Markets' Dialogue with Professor Shi Heling 'column. Readers and friends are welcome to subscribe and follow.

In the previous issue, the editor conducted an exclusive interview with Professor Shi on last week's global turmoil in the stock market, China's reduction in reserve requirements, and how to make reasonable investments in the current international financial environment. Children's shoes who missed the exciting content of the previous issue can review the exciting content of the previous issue in the GMT Markets public.

Looking back at recent global news, last week China released September CPI and PPI data, with CPI data increasing by 2.5% year-on-year, higher than the previous value of 2.3%; The increase in PPI fell by 0.5% compared to the previous month; In addition, China has continuously reduced its holdings of US bonds, reaching a new low in nearly 14 months, while Japan's holdings of US bonds have also dropped to a new low in 7 years; The recent disappearance of Saudi journalists has also caused a lot of uproar (Kashuji, a journalist who specifically criticized Saudi Arabia, disappeared in the Saudi consulate, and his wife in Türkiye informed the adviser of Türkiye's president by telephone; Türkiye then released the American pastor, and the United States increased taxes on Türkiye on the pretext of Türkiye detaining the pastor in August this year, leading to a sharp drop in the lira). Türkiye asked the United States to uphold justice, and the international community also paid great attention to this incident, How Trump handles its relationship with Saudi Arabia will also be the focus of market attention.

In this issue, the editor will mainly interview Professor Shi on issues related to housing prices in Sydney, Melbourne, recent CPI data in China, whether the decrease in China Japan US bond holdings is a coincidence, and current crude oil prices. Below, we will bring you exciting content.

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Hello Professor Shi, some fans would like to ask you another question about the economic crisis cycle. The last economic crisis was in 2007 and 2008, and you previously predicted that there would be no global economic crisis until at least 2020. Do you still hold this view?

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Professor Shi: "Yes, the possibility of a large-scale economic crisis in the near future is very small, and the recent stock market in the United States is more likely to be an adjustment. As for the possibility of an economic crisis, there is currently no sign of it

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GMT Markets: "There are voices in the market that there is a problem of false high or even a foam in Australian house prices. From the perspective of recent policies, housing loan interest rates have been raised in several major lines, and the government seems to be deliberately controlling and suppressing house prices. At present, the house prices in Sydney, Melbourne and other places have declined significantly in the past six months. If the house prices continue to decline, it may cause many industries to be depressed and consumption to be depressed. This is Will it have a significant impact on the Australian economy

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Professor Shi: "From various indicators, there is indeed a certain foam in Australian house prices, especially in Sydney and Melbourne. The Federal Reserve Bank of Australia has taken some policy adjustments, including the improvement of credit requirements.

From the perspective of the government, there are two considerations. The first is to slowly squeeze the foam, but we are afraid that the foam will burst at once and the whole house price will fall too fast, because this will also bring disastrous results to the Australian financial market.

But according to my observation, the overall policy in Australia is a combination of relaxation and tightening, and the overall trend is relatively tight. The downward trend signal of the Australian housing market is also very obvious, especially the liquidation rate of recent housing auctions is also very low.

From the seller's perspective, unless there are special circumstances, homeowners are generally not willing to sell their house at a low price; From the perspective of buyers, as overall housing prices in Australia are declining, we can wait and see because the current opportunity cost is not very high. But I think there is still limited room for the decline in housing prices, especially in the Melbourne housing market. With the increase of immigrant population, the demand for housing is actually increasing

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GMT Markets: "Can you explain why if housing prices drop too quickly, it can also have catastrophic consequences for the financial market?

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Professor Shi: "Okay, only when the investment returns of investors who borrow to buy a house exceed the loan cost, will someone buy a house. In other words, when the housing price drops too quickly and the repayment amount may far exceed the income that investors may receive from the house, investors may prefer to have the bank take back the house rather than continue to repay the mortgage.

This creates bad debts for the bank.

If bad debt accumulates, it will restrict and make banks more cautious in their future lending, which will have a significant negative impact on the real economy, as it requires loans to maintain its operations. If the real economy declines, it means that GDP will decline, which means that the unemployment rate will rise, and various problems will come one after another. This is the situation that the Australian government is trying to avoid. Therefore, the government will control house prices but will not excessively burst the foam at once. "

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GMT Markets: "Recently, China has released consumer price index (CPI) and industrial producer price index (PPI) data, which looks good. However, you have mentioned multiple times before that the Chinese economy is not very good now, so are there any hidden concerns in this

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Professor Shi: "Regarding China's CPI and PPI data, on the surface, both are increasing, but in reality, the PPI growth rate is decreasing and the CPI growth rate is increasing. The decrease in PPI indicates that the Chinese economy is encountering some problems in the production field, one of which is that the Production Manager Procurement Index (PMI) is not very high, even below 50, which leads to insufficient demand for products in the market.

The reason for the rise in CPI is largely due to the Chinese government's very loose monetary policy, which has stimulated the demand for consumer goods. The situation where the growth rate of PPI decreases while the growth rate of CPI increases is very dangerous in economics, because producer confidence is insufficient and consumption needs to be driven by issuing currency; If the opposite can be true, the PPI growth rate will increase while the CPI growth rate will decrease, which is the best scenario. This means that producers are confident in manufacturing a variety of products; But due to the competitive relationship in the final market, the price increase of consumer goods is not very significant, and then the people will benefit

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GMT Markets: "Another question, China's US bond holdings have recently dropped to a new low in 14 months, and Japan's US bond holdings have also reached a new low in seven years. What do you think of this change

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Professor Shi: China's selling of US bonds is not due to the trade war between China and the United States, and the impact of China's selling of US bonds on the entire US bond market is minimal. Because US bonds are the highest level of debt, they are also not low in terms of yield, and the market liquidity and credibility of US bonds are also very strong. Once sold, new buyers will immediately continue to buy. Personally, I think reducing the holdings of US bonds between China and Japan is An adjustment to its assets without excessive interpretation

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GMT Markets: "Recently, the G20 Summit and the Central Bank Governors' Meeting were held in Indonesia. It was mentioned in the meeting that emerging markets may face a series of problems and risks in the current global state, while the Türkiye lira and the Indonesian rupiah have declined significantly before. What risks do you think emerging markets will face in the current financial environment? What do you think of the potential development prospects of emerging markets?"

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Professor Shi: "This is a good question. For emerging economies, the biggest source of risk is capital outflow. The Federal Reserve is constantly raising interest rates, and theoretically the US dollar will become stronger, so a lot of capital will withdraw from emerging economies and flow to the US market.

But I don't think we need to worry too much about the problems of emerging economies now. Nowadays, economies adopt a floating exchange rate system, unlike many emerging economies before 1997, especially th