Article/Liu Shijin, columnist of Sina Financial Opinion Leader (WeChat official account kopleader)
If we only try to reduce the leverage ratio in the short term without paying attention to necessary reforms, or if we adopt too many administrative measures to reduce leverage as in some places, we may not achieve the original purpose of the policy, or even go against our wishes. For example, due to the asymmetry of government credit support, the local governments and state-owned enterprises that should reduce leverage most have strong pressure bearing capacity, and private enterprises will be more impacted; "One size fits all" leverage reduction has caused credit contraction in some places, affecting normal operations.
In recent years, China's economy is experiencing a transition from high-speed growth to medium speed growth. In the transition period, it can be said that it is medium speed growth, and after stabilizing, it is medium speed growth. In this process, first of all, the historical peak demand of important end products appeared, and the demand structure took the lead in adjusting; The adjustment of the demand structure has brought about a slowdown in the total demand, while the supply side adjustment is slow, so there is a serious overcapacity. After a period of capacity reduction, supply and demand reached a relative balance, and the economy began to enter a medium growth platform; At this time, the problem of high leverage ratio was highlighted. Only by stabilizing and gradually reducing the leverage ratio, can the medium growth platform be stabilized. In this way, we can see that with the transformation process of the growth stage, the demand structure, supply structure and financial structure have been adjusted in turn.
International experience shows that leverage changes have a long cycle. It takes 30 to 40 years for the leverage ratio of the United States and other countries to rise or fall, and it may take 10 years or more to reduce leverage. As far as China is concerned, in addition to the usual changes from economic expansion to contraction, there are also factors such as the transformation of growth stages and system transformation, which makes the changes in China's leverage ratio more complex.
There are complex institutional and policy reasons behind the high leverage of China's economy. In recent years, with the economic slowdown, there is a strong incentive to maintain growth through leverage. The first is the performance evaluation system that pursues excessive growth. The growth is mainly guaranteed by investment, which needs to be leveraged through explicit or implicit local debt. The second is the soft budget constraint of the government and state-owned enterprises. This is a problem raised at the beginning of the reform, which has not been solved so far. When some places and enterprises borrow money, they do not seriously think about repaying it. There is also excessive expansion stimulated by bubbles in real estate, finance and other fields. Social mobility enters these areas through various channels. The channel for money to enter the real economy is not smooth, but the channel for money to enter these fields is very smooth. The last is the defect of enterprise financing structure and governance structure. The proportion of equity capital of Chinese enterprises is low, and they rely too much on external debt financing, and so on.
Correct or good deleveraging should focus on solving the system and policy problems behind high leverage while stabilizing leverage and normal operation, shift from excessive expansion mode to prudent or prudent operation mode, improve efficiency, and gradually reduce the leverage ratio to an appropriate level. On the contrary, if we only try to reduce the leverage ratio in the short term without paying attention to necessary reforms, or if we adopt too many administrative measures to reduce leverage as in some places, it is likely to fail to achieve the original purpose of the policy, or even backfire. For example, due to the asymmetry of government credit support, the local governments and state-owned enterprises that should reduce leverage most have strong pressure bearing capacity, and private enterprises will be more impacted; "One size fits all" leverage reduction has caused credit contraction in some places, affecting normal operations.
Stabilizing leverage and gradually reducing leverage requires a profound reform, as well as financial innovation, including a practical shift to a high-quality development track and a corresponding change in the performance evaluation mechanism; Break the long-standing soft budget constraints of local governments and state-owned enterprises; Deepen financial reform and opening up, and open more channels to serve the private economy, small and medium-sized enterprises, and the real economy; Effective use of national credit can consider increasing the issuance of low-cost long-term construction bonds to provide financial support for government public goods and services.
After the central private economy forum, relevant departments and local governments took measures to solve the problem of difficult and expensive financing of private enterprises. Since the private economy has played an important role in the national economic and social development, we should put forward such policy objectives, that is, the financial system, especially the formal financial system, should support the private economy in accordance with its contribution to the national economic and social development. Specific indicators can also be proposed. The realization of such policy objectives should not and cannot mainly rely on administrative measures, but should be based on mechanism transformation, especially the targeted relaxation of financial market access, allowing and supporting the development of financial institutions, formats and products that can provide professional services to private SMEs. The financial system has increased its support for private enterprises, not to lower operating standards and relax risk control, but to put forward the urgent requirements of accelerating financial reform and opening up.
Reducing leverage is both a strategy and an art. We should find a balance between deep reform and short-term balance, breaking rigid repayment and avoiding large-scale risks. Be prepared for its long-term and complexity. The experience of Japan shows that we should not only prevent the excessive short-term tightening from causing the growth rate to decline too fast, but also prevent the currency "draining" from reducing leverage halfway. Long term vision and strategic determination are particularly important. The successive adjustment of demand structure, supply structure and financial structure is a trilogy of the transformation of growth stages. Properly stabilizing and reducing leverage will create favorable conditions for the economy to smoothly transition to a medium speed platform and achieve high-quality development.
(The author of this article introduces: professor, researcher, doctoral advisor, deputy director of the Development Research Center of the State Council.)
