Do Not Let The Stock Market Kidnap China's Economic Transformation And Upgrading.

Since 2014, the internationalization of RMB has accelerated, and the emergence of "one belt and one road" and Asian investment bank has become the trend of the times. With the free flow of international capital, asset price bubbles will be more complicated. If bubbles burst, capital flight will seriously affect the stability of the RMB value and trigger a serious financial crisis. Therefore, in the context of RMB internationalization, asset price bubbles should be more prudent, encouraging bubbles and puncturing bubbles are not good policies.

In July 2014, China entered a bull market. In less than a year, the Shanghai Composite Index rose from 2000 to 4100. The current rally is clearly not the result of fundamentals. The main explanation of the market is that reform expectations and monetary policy are loose, and most believe that the rise of the stock market is conducive to China's economy. From the official attitude, we can also see clearly the tendency of the stock market to promote economic transformation. "The bull market in general is conducive to economic development, promoting low cost financing, generating wealth effects and stimulating consumption," wrote the people's Daily recently published in the people's daily. "This bull market is generally conducive to economic development, promoting wealth effect and stimulating consumption." in the reform drive the stock market up, "the rise of the stock market is a positive recognition of the Chinese stock market for the future China's economic trend.

According to western economics, the rise of the stock market is indeed good for the economy. The main paths include Tobin Q effect, enterprise balance sheet effect, wealth effect and resident liquidity effect. Simply speaking, when the stock market goes up, enterprises are more inclined to invest and expand their production capacity. At the same time, the increase of credit qualification leads to the decrease of financing cost; the total amount of residents' assets increases and stimulates consumption, while shares belong to liquid assets, and liquidity is better than fixed assets, which is also conducive to consumption. On the whole, the rise of stocks is conducive to corporate investment and household consumption, thereby making the real economy better.

However, the premise of the above theory is that stocks are "healthy cows" rather than "mad cows". The rise of stocks under "mad cow" will actually damage the real economy. Moreover, at present, the whole society has high expectations for the stock market. It seems that only through the stock market can the Chinese version of the "new economy" be spawned, but this may be just a "beautiful trap".

First, looking back at the history of the United States, it is not the "Internet bubble" that spawned the "new economy".

At present, the Chinese market has such a view that the US "Internet bubble" is the reason for the "new economy" of the US in the 90s of last century. The growth rate of GDP in the United States began to exceed 3.5% in 1992, and remained at 3%-5% in 2000. The "new economy" refers to the whole of the United States in 90s. The term "new economy" was put forward by the US business week in 1996, entitled "the victory of the new economy", which is used to describe the achievements of the US economy in the past 1990-1996 years. It can be seen that the "new economy" first refers to the US in the early 90s. Look at the US NASDAQ index. From 1991 to 1997, the annual increase is about 20%-25%, which is a relatively normal increase. In 1999, it rose by 52%, or 40% in 2000. It is generally believed that from 1995 to 2000, the "Internet bubble" period, but from the NASDAQ index can clearly see that 1998-2000 years is the main period of the "Internet bubble". It is not difficult to find out from the chronological order that the US has "new economy" before it has the "Internet bubble", rather than the "Internet bubble" which has led to the "new economy". Back in China, in the less than a year since June 2014, the Shanghai Composite Index has increased by more than 100%, and the valuation of technology stocks has surpassed that of the US in 2000, and the economy has not improved. At this valuation level, how can we learn from the experience of the United States in the 90s? Let alone, in the United States, the "new economy" has spawned the "Internet bubble" rather than the other way around.

The United States first had the "new economy", followed by the "Internet bubble", and the stock market was not the cause of the new economy.

Second, the stock bubble is different from the real estate bubble. Economics The direct contribution is smaller.

The real estate market is very similar to the stock market, and both have investment attributes, which are apt to cause asset price bubbles. However, the real estate market has a direct contribution to the economy, but the stock market does not. There are mainly two ways to invest in real estate. One is to build new houses, the other is to use second-hand houses for two. This is consistent with the primary and secondary markets of the stock market. Whether in the stock market or in the housing market, the two tier market hardly contributes to GDP, that is to say, no matter how GDP is bought or sold in the two market / secondary market. However, the primary market of real estate is directly generated by GDP, and there is also a huge real estate industry chain -- upstream raw materials, middle reaches of building materials, downstream decoration appliances, etc., all of which can directly generate GDP. However, the primary market of stock market does not directly generate GDP. It only realizes the transfer of wealth from the investor to the financing side, and the financing side does not necessarily generate GDP. Of course, the author does not approve of raising GDP through the real estate bubble, but by contrast, it is more difficult to raise GDP through the stock market.

In a word, before the conversion of "concept" and "emotion" into technology and profit, the direct contribution of stock bubbles to the real economy is very small. When the stock market is crazy, how much capital is willing to turn from the "real money making virtual economy" to the "unrealized real economy" is a matter of deep thought.

Third, we should encourage speculation in making quick money and curb production, consumption and investment.

First, speaking of production, generally speaking, the relationship between stock market and production is not large, but in the case of "mad cow", the stock market will cause interference to production. Logic is very simple, the stock market is open at the working time, and China's stock speculation is mostly short term, so sneaking stocks during working hours will inevitably result in lower production efficiency. The impact of "professional investors" is even greater, which will reduce labor participation rate and directly reduce GDP according to Okun's law.

Secondly, consumption. wealth effect The rise of the stock market helps consumption, but under the "mad cow", the stock market may inhibit consumption. Although selling stocks is not common, it is not impossible to reduce the current consumption and invest in the stock market in pursuit of more wealth. When the pursuit of wealth leads to a reduction in consumption, the total consumption will be reduced. In fact, since the bull market in July 2014, consumption has not been any improvement or even slipped. Although there are many other reasons, at least it shows that the stock market's stimulus to consumption is very limited.

Finally, we talk about investment, according to the Q effect. equity market The rise is conducive to the expansion of the enterprise's reproduction, but in the case of bubbles, there may be a situation of setting up factories to invest money instead of investment. What is more serious is the fact that enterprises are not involved in the stock market for a few reasons. For the listed companies only, the statistics show that as of the end of 2014, there were 337 listed companies holding 1336 stocks, and 77 listed companies investing in stock market funds in excess of 100 million. Because there is no need to disclose data publicly, non-listed company's investment in the stock market may be even more serious. If the stock market performance is general, then these funds will be used for investment, and to a certain extent, the "mad cow" of the stock market will reduce investment.