Riding the wind of rebirth

“If, and I mean if,” Li Laosan said, “if international speculative capital starts by targeting Hong Kong first, then our reserves should be fine. But if they first harvest the surrounding areas and then launch a full-scale attack on Hong Kong with a great victory, we’ve roughly calculated that we might be in trouble…”

"The old men at the Financial Bureau discussed it and decided that this matter still needed to be reported to the domestic authorities. Current signs indicate that international speculative capital has begun to gather in Southeast Asia, preparing to artificially trigger a Mexican-style financial crisis!"

"Then why did you accompany your cousin Anxin on her sightseeing trip?" Zhou Zhi felt a chill run down his spine: "How many days have you already wasted?"

"Rome wasn't built in a day," Li Laosan added, even throwing out a punchline. "Before the report, we need to calculate the evolution of the situation more precisely. Moreover, the domestic leadership probably doesn't have a deep understanding of the Mexican crisis. We need to have Xiaozhi review the evolution of the Mexican crisis first. And for some of the intervention points and countermeasures we've researched, we also hope to have Xiaozhi calculate their effectiveness..."

The evolution of the financial situation is quite similar to weather changes, exhibiting considerable nonlinearity. Before the advent of nonlinear calculation systems, it was extremely difficult to simulate and predict, and even if some tools existed, they were quite unreliable.

The Bu Xiaozhi nonlinear supercomputing system is practically tailor-made to solve this kind of problem.

After achieving both linear and nonlinear computing power in its graphics cards, Xiaozhi has once again built a new ultra-large cluster, with its linear computing power now reaching 12 billion operations per second.

This already surpasses the Dawning-1000A, which has been publicly announced in China. However, Zhou Zhi learned through private channels that the country's two latest supercomputers have entered the acceptance phase. They are the Galaxy-III from the Computer Research Institute of the National University of Defense Technology and the Dawning-2000 from the Chinese Academy of Sciences, with calculations reaching 13 billion and 20 billion times per second, respectively.

Therefore, Xiaozhi has nothing to be proud of. The only thing to be proud of is that both Galaxy-III and Dawning 2000 will adopt the latest Seeco operating system and Costs smart terminal architecture from the Clover Group. This will undoubtedly create a powerful and comprehensive operating system environment for supercomputing to a wider range of applications.

"Then let's hurry up and have the team deconstruct and put the model you brought into the pool, hand it over to Xiaozhi for calculation, and then take the calculation result and combine it with the financial intelligence of one or two small Southeast Asian countries to conduct another calculation and see what the consequences will be."

However, things progressed much faster than Zhou Zhi had imagined. Just five days later, Mai Xiaomiao and Xiao Zhi's team had just completed the financial simulation results for Thailand and Indonesia when the three of them received orders to go to Beijing to report. It seemed that the situation in Hong Kong was relaxed on the outside but tense on the inside, and the efforts were not limited to Li Laosan.

However, the reason for his trip to Beijing had nothing to do with the catastrophic situation predicted by Xiao Zhi. Instead, it was because the financial authorities invited Li Laosan to give a presentation on the Mexican financial crisis.

"Mexico was once the country in Latin America that attracted the most foreign investment, but speculative investment expanded without limit while productive investment continued to decline, resulting in a lack of economic growth momentum, while consumption was unusually high, creating a serious economic bubble."

"Moreover, when faced with the trade rules of developed countries, Mexico prematurely and proactively gave up the rights that a developing country should have and prematurely withdrew its trade protection policies. This led to a massive influx of foreign goods, resulting in a larger current account deficit and a rapid expansion of the trade deficit."

Li Laosan sat at the center of the stage in the ministry's conference room, speaking eloquently. Below the stage, many elderly people, seemingly of high rank and influence, including several veteran cadres Zhou Zhi recognized from the news, were diligently writing in their notebooks. This made Zhou Zhi, sitting at the back of the conference room, think that Li Laosan, unusually dressed in a stand-up collar Zhongshan suit, looked incredibly handsome.

"Some hot money looks tempting, but it's actually a hot potato. If it can't be effectively channeled into production, it will naturally flow into the stock market and the real estate market, creating a false prosperity."

"Based on the results derived from the latest nonlinear supercomputing system, the only way to solve the problem is to address it before it occurs. Once a crisis is formed, it will be extremely difficult to salvage the situation afterward."

"We must explore a financial development model that suits our national conditions. We must not blindly follow trends or be overly ambitious. We must always pay attention to the systemic risks hidden beneath the dazzling development data."

"First and foremost, we must follow the laws of financial development, base ourselves on our national conditions, and steadily align with international rules," Li Laosan emphasized. "Financial development must be commensurate with the level of development of our domestic market, the diversity of financial instruments, and the perfection of rules and mechanisms. It must also have the corresponding ability to manage risks and adapt to changes in the external environment."

"If the conditions are not right and preparations are insufficient, we cannot fully open the financial market; otherwise, it would be tantamount to destroying our own Great Wall."

"Second, we must curb speculative investment and pay attention to monitoring the quantity, structure, and flow of foreign investment. We should closely track the overall trend of global foreign direct investment, industry trends, the trend of multinational corporations adjusting their investment layout, and the investment gap for sustainable development goals in developing countries to attract high-quality foreign investment. We should vigorously attract medium- and long-term capital and direct investment, and appropriately control short-term capital and indirect investment."

"In recent years, many places have increased preferential policies to attract foreign investment, which has indeed added a lot of vitality to the local economy. However, recently we have seen many examples of people coming to the mainland under the guise of foreign investment to engage in speculative trading, cash out and leave."

"Although the amount is not large, it is enough to warrant vigilance, especially regarding foreign capital flowing into the securities market. This is the third point I want to make: we must strengthen the monitoring and management of the securities market, closely monitor the impact of foreign capital injection on the domestic exchange rate and economic financing capacity, strengthen the monitoring of key indicators such as credit, liquidity, liabilities, exchange rates, asset and capital outflows, formulate a timetable for foreign capital entering and leaving the domestic securities market, and strictly maintain the available foreign exchange reserves within a relatively safe range."

"Before this crisis broke out, Mexico's dependence on the US market was becoming increasingly apparent, and its industrial structure was deeply tied to the US market. This had a huge impact on Mexico's domestic industries and agriculture. The industrial structure showed a strong external dependence, which was also accompanied by a high degree of vulnerability."

"To prepare for crises in advance, we must comprehensively improve the security of our industrial system." Li Laosan said with a keen eye: "First, we must focus on cultivating our domestic industries, building a resilient industrial and supply chain system, enhancing the technological content and international competitiveness of our products, and forming a healthy and balanced macroeconomic structure."

"Second, we must actively promote the opening of the technology trade market in the context of economic globalization, so that economic and technological cooperation and trade and investment liberalization can go hand in hand, so that developing countries and developed countries can benefit together and enhance the international community's ability to resist financial crises."

"The third point is that in industries that are crucial to the national economy and people's livelihood, foreign capital is strictly prohibited from gaining a controlling stake, and in the overall proportion of these industries, foreign capital is not allowed to exceed state-owned capital and domestic private capital." (End of this chapter)