What Is The Problem Of Equity Market? This Is China'S Equity Market.

In a forum, Li Yang, former vice president of the Chinese Academy of Social Sciences, talked about leverage and debt. Many foreign analysts began to sing empty China, not because of government debt, but rather corporate debt. In China, the leverage ratio of residents is not high, nor is the government very high. But Chinese enterprises are very high, and Chinese enterprises are out of trouble. Banks will soon become bad assets. Banks will soon be out of trouble when problems arise. Financial problems will soon cause problems in China's economy. Therefore, such a close logical relationship exists, so that we should maintain adequate vigilance against enterprises' asset liability ratio, debt to GDP ratio and leverage ratio.

So in a sense, the so-called "deleveraging" problem in China is mainly to leverage the enterprises.

For assets, Li Yang believes that China's current asset situation makes China enough to cope with the 1.5 financial crisis in the United States, that is, our response to the crisis is very strong.

The conclusion is that China's leverage ratio is on the rise. It is a dangerous trend. But we are still in a controllable range. We can solve it effectively, but our Chinese economy is resilient, flexible, and has many weapons in its arsenal.

The following is a written record:

What is the problem of the equity market? This is China's equity market. From the main board to the growth enterprise board, to the small and medium sized boards, to the new three boards, the top and bottom are smaller and smaller. The biggest one is the motherboard. Before long, the boss of the new three boards said that our goal is to surpass the motherboard. This structure is the first priority. The structure of the United States is getting bigger and bigger.

In the developed market countries, he attached great importance to capital formation. We do not attach importance to capital formation here. We only pay attention to capital pactions. This development concept must be reversed.

At the same time, we need various forms to support innovation, promote new incubator mode, encourage development of crowdsourcing, crowdsourcing and public service, develop investment in the business of day start, deepen the reform of gem, new three board, and so on.

Housing is short of money, urbanization is short of money, these areas are short of money, manufacturing industry is no longer short of money, and small and medium-sized enterprises are short of money. In these areas, we must set up targeted long-term financial institutions. The Third Plenary Session of the Third Plenary Session put forward the fifth plenary session.

The next problem is to reduce leverage.

Deleveraging has become a national policy. If 08 years ago, the global leverage rate is mainly caused by developed countries, many researchers have realized that 08 years later, after the crisis, the rise of leverage is attributable to the developing countries. As China's largest developing country, China is the biggest developing country. For this reason, what I said is a dangerous prediction. It must be taken seriously. The Central Committee of our party has really checked it. Therefore, in the decision of the fifth plenary session, it is explicitly written down that we should reduce the leverage ratio. This is the first time in our party's document that we have clearly lowered the leverage ratio to the level of our strategic task.

We need to know what the leverage ratio is in our country. We have a national balance sheet analysis. There are 12 books and two books.

Let's sum up to share with you that this is the leverage ratio of China's whole society. We can see clearly that we are rising and rising since the crisis, and 09 years later, it has begun to rise.

Deleveraging involves molecular countermeasures, denominator strategies, debt repayment, debt reduction, government or central bank debt taking. These are our measures. The so-called leverage is the relationship between molecules and denominator. We decompose the molecules into three measures. Denominator is a measure to increase GDP.

We have studied China's balance sheet for several years, and finally came to a very simple conclusion. Once debt is created, there is no way to solve it effectively. There is only one way to develop the economy, especially for a country as a whole, for a split, you pfer to others, you can pfer the enterprise to that enterprise, the enterprise is pferred to the residents, the enterprise is taken away by the government, this is acceptable, but the state can not get rid of the debt, only to develop the economy in an honest way, develop the denominator and dilute the molecule.

Therefore, to reform and maintain this level of growth and control the growth rate of debt is still the key to solve all problems, so debt problem is still an issue of economic growth.

Specifically, the leverage ratio of Chinese residents, Chinese residents did not borrow money, and then the real estate market, mortgage and loan.

Content consumer goods, cars enter families, borrow money, and now we need to encourage.

And then encouraged consumer loans to come in, so everyone began to borrow money, which led to changes in the leverage of Chinese residents, and 09 years later, there was a very rapid development.

The leverage ratio of China's non-financial corporate sector is the same. All of its changes took place after 09 years. Such a leverage ratio, we see that, in detail, our asset liability ratio rose from 54 to 60, and 5 points. The proportion of debt to GDP rose from 317% in 07 to 317% in 2014, which rose by 122 percentage points. All these increases are attributable to such measures as we rely on monetary policy to stimulate the economy.

We do not comment on this measure. We say this thing has changed because it was taken.

Such a comprehensive result is the leverage ratio, which has increased from 98% in 08 to 149.1% in 2014, which has increased by more than 50%. It is precisely because of this figure that many foreign analysts began to sing empty China, because in China, sectors such as the United States say that the leverage ratio is very high, the US is the high leverage rate of the residential sector, the high leverage ratio of the government, the low enterprise, and its enterprises are very sound.

In China, the residents are not high, the government is not very high, but Chinese enterprises are very high, while China is very high.

The problem is that banks will become bad assets immediately, and banks will soon be out of trouble when financial problems arise. Fiscal reserves will soon cause problems in China's economy, so there is such a close logical relationship, so we need to be vigilant for the assets and liabilities ratio of enterprises, the proportion of debt to GDP and the increase of bar rate.

So in a sense, the so-called "deleveraging" problem in China is mainly to leverage the enterprises.

This is the situation of government departments, which accounted for 60% of GDP from 1994 to 2014. This is under the international security line. Many people say China's local government debt and so on.

It is not serious at all, whether it has anything or not, but it has assets. Its assets are enough to repay it.

So when we talk about this debt problem, we have to talk about assets, because no one will say that we have nothing to do with borrowing, especially the Chinese government and Chinese enterprises. Borrowing is for production and borrowing is to create wealth, so we have to look at two points of view from the balance sheet. In comparison with China's liabilities and assets, our assets are far greater than liabilities, with a net asset value of 103 trillion and 300 billion, which is higher than the GDP of our year, which is at the end of 2014.

But when people talk about big assets, many people will question it. Because some assets, such as land, count in, land can not be sold, land may sell at a very good price, but the land may not sell for a penny, so we still need to eliminate such a few, remove all the land and real estate, and only leave highly liquid assets. We calculate that there is still money, so China's sovereign assets net value is 28 trillion and 500 billion, quite high. After the announcement of this result, some foreign scholars say that China's current asset situation makes China enough to cope with the 1.5 financial crisis such as the United States, that is, we have a very strong asset to deal with the crisis.

The conclusion is that China's leverage ratio is on the rise. It is a dangerous trend. But we are still in a controllable range. We can solve it effectively, but our Chinese economy is resilient, flexible, and has many weapons in its arsenal.