Shen Jianguang: Sensational Chinese Version QE

One Chinese government implemented the 10 trillion stock debt replacement, and the news of the upcoming Chinese version of QE will perturb the capital market. In my opinion, this message is hard to justify and also sensational.

Actually, yes, yes. China's fiscal reform Investors who understand the overall framework and steps will not find it difficult to find that the document issued by the State Council on strengthening the management of local government debt in September last year, that is, Article 43, has made clear arrangements for how to deal with the stock debt, that is, the local government can apply for the issuance of local government bonds, and even if necessary, it can dispose of government assets to repay debts. The Treasury confirmed at the weekend that it had issued a quota of 1 trillion yuan for local governments to replace the stock of high cost debt with bonds. It was not an urgent decision, nor a new content. It was only a request for early disposal of the stock debt.

Further, when it comes to the Chinese version of QE, the rumors that the central bank directly purchases local government debt is even more unrealistic in my view. In fact, it is obviously different from the western countries' withdrawal from the QE. For example, the US financial problem has always been a battleground for the two parties. The financial union in the eurozone is not deeply troubled by the debt crisis for many years, and Japan is deeply troubled by the debt problem. The financial debt of these countries is around 100% of GDP or higher. In contrast, China's national debt accounts for only 20% of GDP, plus local debt no more than 60%, and China's fiscal space is still large.

The obvious problem in China lies in structural contradictions. For example, it is not difficult to find the following strange phenomenon, that is, the current central treasury bond stock is relatively low, as of 2014, the balance is only 9 trillion and 600 billion, accounting for only 15% of GDP, and the yield of treasury bonds in the same period is only about 3.5%. It can be said that treasury stocks are low and interest rates are low. In contrast, the yield of the city government bonds issued by local governments was as high as 5%-6.5%, and the cost of financing through shadow banking reached 10% or even higher. Similarly, the cost of financing infrastructure projects is quite different. Institutional nature Distorting, closing the front door to open the front door is a positive measure to reform.

The author has made recommendations in the August 20, 2013 article "Reflection on" four trillion "phobia" and "ChinaEconomics Weekly: Three predictions for local government debt" published in January 9th this year. China has ample fiscal space. It is also feasible to consider issuing special treasury bonds to replace local platform bonds in the future.

From this perspective, there is no emergency crisis, and the financial space is larger. The judgment of the central bank's QE is false. Of course, there is also a view that the central bank's launch can slow down foreign exchange and achieve the direct delivery of basic currencies.

In my opinion, such an idea is more of a lack of understanding of the central bank. In fact, it maintains the consensus of almost all central banks in the central bank's independence, and the central bank law of China also stipulates that "the people's Bank of China shall not be able to overdraft the government's financial overdraft, and can not directly subscribe, sell treasury bonds and other government bonds". If we want to achieve the goal of putting the underlying currency on the move, it will also be more reasonable to reduce the accuracy.

In fact, considering the purchase Replacement debt The main body is mainly commercial banks. As vice minister of finance Zhu Guangyao responded to the rumors, this is the contractual behavior between enterprises and commercial banks. Under this framework, the author believes that the central bank should only do well in monetary policy reserve according to liquidity monitoring, such as lowering interest rates and reducing contingency.

All in all, on the basis of strict screening of local government debt at the beginning of the year, the author believes that this part of the stock debt, which belongs to the direct debt of the government, will be released from the short-term and high interest rates and become a long-term, low-cost government direct debt, which will help to make the debt maturity structure and cost more reasonable and match with the local government projects. This is not only a further escalation of the fiscal reform, but also a necessary measure to prevent the reform from causing fluctuations in the short-term economy.

In the long run, avoiding the same size approach is still the way to resolve contradictions. At the same time, speeding up the overall budget management, information transparency, and promoting local government debt rating and other measures are still indispensable measures and efforts in the direction of "opening the front door and blocking the back door".