China'S Economic Pformation And Reform Need This Bull Market Too Much.

In any way, China's economic pformation and reform need this bull market too much.

The central government has made local governments no longer self willed through vigorous anti-corruption and fiscal reform. The huge amount of savings funds that have been locked up in the local government debt projects under non-standard and financial affairs have finally been released into the stock market. This is a golden opportunity for China's economic pformation.

Bull market, you must not go bull market, you must not go.

Today, the Shanghai Composite Index has plunged by 7.7%, and stock index futures have set a record of down.

The main reason for this sharp fall is due to the restrictions on new two financial institutions and the supervision of entrusted loans. The former has blocked the financial system and entities' wind from continuing to blow into the stock market, which aggravated the market's worries about detonating credit risks in the two departments of real estate and local authorities.

Reason 1: relieve the pressure of capital outflow

In December, the trade surplus of 304 billion 500 million yuan in a single month, FDI was $13 billion 300 million, but in December, foreign exchange accounted for 118 billion 400 million yuan in the financial caliber, and the increase in foreign exchange deposits was also less than 18 billion 600 million yuan, which only indicated that the entities had suffered capital outflows, and this kind of capital outflow still occurred in the stock market rising stage.

Once the bull market is no longer in place, taking into account the decline in the return on capital of Chinese entities under the background of overcapacity, taking into account the drop in risk-free interest rates and the rise in risk premium, the rate of return of RMB assets will decline systematically, and the dollar appreciation cycle will be opened. Residents will reverse the disposition of assets in the past and convert foreign currencies into debt, and begin to repay the US dollar debt that will soon become expensive.

Although we believe that the strength of the dollar makes China's currency crisis almost 0, because China has more than 3 trillion foreign exchange reserves, capital account is not fully open, close to 20% of the deposit reserve, and the central bank has a strong intervention power in the central parity of the RMB exchange rate.

But the risk is that the pressure of capital outflow may limit the space for monetary easing. Especially when the economic downturn needs to be increased by a large amount of monetary easing, the central bank may be forced by capital outflow to compensate for the gap in the underlying currency - the enhanced expectation of depreciation - capital outflow - the monetary dose that is finally released will not be enough to save the weak real economy and the risk of China's economic operation.

But the rise of the stock market can release more time and space for the smooth operation and reform of the economy through increasing the attraction of RMB assets and easing the pressure of capital outflow under the strong cycle of the strong dollar.

By the end of 2013, the debt ratio of non-financial enterprises has risen to 123%, GDP, which is far higher than the international warning line with a debt ratio of 90%.

It is said that China's debt is rooted in government departments. In fact, China's largest potential debt crisis stems from the corporate sector.

After several rounds of leverage expansion in 2003, 2009, 2012 and the second half of 2013, non-financial companies have been heavily indebted.

The leverage of state-owned enterprises is the main reason for the high debt of non-financial enterprises.

On the one hand, after the financial crisis, the non market sectors as the main force of steady growth, the asset liability ratio of state-owned enterprises has greatly expanded under the promotion of large-scale stimulus policies.

On the other hand, when the real economy is overcapacity, and the industries with insufficient supply capacity and high profitability are controlled, coupled with the high interest rates, high rents and high labor costs of the whole society, the demand for effective financing in the private sector is beginning to weaken.

In addition to the contraction of external demand, state owned enterprises plus leverage also need to shoulder the responsibility of shifting private sector leverage.

Bull market, you do not go bull market, you do not go.

In order to prevent the accumulation of systemic financial risks and realize the "air refueling" deleveraging, it is very important to rely on the reform of state-owned enterprises to improve the profitability of state-owned enterprises.

Large scale clearing of capacity and violation of bottom line thinking are not feasible.

Over the past few rounds of economic expansion, state-owned enterprises have been leveraged. But the state enterprises' lethargy and low leverage efficiency are important reasons for the rising debt rate.

Through the reform of state-owned enterprises, the leverage efficiency and profitability of state-owned enterprises can be improved, so that their profits can be converted to retained earnings faster than liabilities expansion, and the debt rate of corporate departments will naturally fall back.

The core of the reform of state-owned enterprises is to promote separation of government and enterprises, while the resistance to the separation of state and enterprise from the securitization of state assets is small. Through the issuance of stocks and convertible bonds, it is possible for the government to accept the reform mode of state-owned enterprises.

After the securitization of state assets, the property rights of state-owned enterprises will be directly changed from a single entity controlled by the government to a plurality of subjects. The diversification of property rights means the separation of government and enterprises, which will help the state-owned enterprises form the corporate governance structure that the shareholders' Association, board of directors and management can check and balance with each other.

In addition, securitisation of state assets helps to maintain and increase the value of state-owned assets.

On the one hand, the external regulatory pressure of the capital market promotes state-owned enterprises to improve corporate governance, establish effective incentive and restraint mechanisms, and improve profitability.

On the other hand, the capital market can play a role in the layout and adjustment of state-owned assets. It can adjust the proportion of state-owned assets in listed companies by increasing capital and expanding shares and backdoor listing, and further concentrates resources on high-quality listed state-owned enterprises. It can also carry out mergers and reorganization, and will distribute state-owned assets to high-end equipment manufacturing and modern service industries with profit prospects and economic pformation.

It can be seen that securitisation of state assets will become the vanguard of the reform of state-owned enterprises. It can be leveraged by increasing capital and expanding shares, borrowing strict external supervision in capital market and diversifying the main body of property rights, so as to achieve double purposes of deleveraging and reform of state-owned enterprises.

However, in order to realize the full and effective pricing and capital restructuring of state-owned assets, state-owned assets securitization requires the capital market to have the function of value discovery and value realization of state-owned assets, but the two must rely on an active capital market and bull market.

Direct financing can solve the financing difficulties, and indirect financing can hardly add bricks to the economic pformation.

On the one hand is the high cost of entity financing, and economic pformation is increasingly difficult.

The general lending rate is basically around 7%, but it is difficult for small and medium enterprises to ask for it. The interest rate of channel financing such as trust, fund subsidiary, brokerage and information management is generally over 9%, while the interest rate of private lending is generally over 10%.

Such a high cost of capital is enough to obliterate all technological progress and innovative spirit.

The reason for the high rate is not the lack of credit supply. In recent years, China's economic growth has dropped to a new level. However, the total amount of new social financing and RMB loans have reached a new high.

For financial institutions, the asset end is an exuberant credit demand for excess capacity industries and local financing platforms under the soft budget constraint. The debt side is high in China's savings rate under the background of declining current account surplus and declining population dividend.

Under the bottom line thinking, the budgetary soft constraint departments can not smoothly launch the production capacity process, and the aging of the population decides the long trend of savings rate decreasing. For the majority of market-oriented financing entities, the high cost of financing under indirect financing system is irreversible trend in the next few years.

On the other hand, indirect financing suffers from the poor pmission of monetary policy mechanism.

The central bank plans to release water to reduce the cost of entity financing. However, under the background of pformation, the highly uncertain economic operation environment has caused banks to decline the credit expansion of small and medium-sized enterprises due to the worry of asset quality.

That is to say, monetary easing has been unable to effectively pmit to the real economy.

The decline in risk preference of banks has led to the "escape quality" effect in the credit market, where banks have largely allocated credit assets to local platforms and SOEs that take into account the characteristics of income and security, while SMEs generally reflect problems such as financing difficulties and financing.

Direct financing can better solve the current financing difficulties of the real economy.

In the bull market environment, we should accelerate the registration system and reduce the financial threshold for the listing of GEM companies, so as to solve the financial difficulties faced by the indirect financing system for the market financing entities.

The United States has created a large number of new industrial clusters during the 18 years of bull market in the past 1982-2000 years, which is also the most urgent source of China's economic pformation.

In short, no matter from which aspect, China's economic pformation and reform need this bull market too much.

The central government has made local governments no longer self willed through vigorous anti-corruption and fiscal reform. The huge amount of savings funds that have been locked up in the local government debt projects under non-standard and financial affairs have finally been released into the stock market. This is a golden opportunity for China's economic pformation.