China'S Economy Is Still In A Deleveraging Cycle.

What is the current period of China's economy? Why is the A share market down? Why is the overall debt rising? Overall, the large-scale lending cycle has come to an end, and China's economy is still in a deleveraging cycle.

The Chinese market is being polarized, and the cost of government debt or covert debt has been reduced, such as local debt swap and PPP projects. The cost of small and medium enterprises has not risen. So far, the short-term terminal financing cost of the OTC market has been maintained at more than two bits, and is very strong.

Stock market and diversified direct financing channels can be used as a supplement to asset allocation and reduce financing costs. Because of the panic and spread of money and insider trading, the stock market has frozen stiff, leaving only the bond market from left hand to right hand.

The reform started in 1978.

Begin to add leverage.

Now, the leverage process is no longer obvious. Two things show that the volume of currency issuance tends to decline.

After the subprime crisis, the M2 growth rate ranged from 12% to 18%. From the second half of 2015, the growth rate of M2 was steadily reduced to about 13%.

In 2015, the total amount of basic currency was 27 trillion and 640 billion yuan (6 trillion and 990 billion yuan for currency issuance and 20 trillion and 650 billion yuan for bank deposit reserve), a decrease of 1 trillion and 770 billion yuan from the end of last year and a 6% decrease.

For the first time in nearly more than 10 years, the annual decline in the base money balance has symbolic significance.

Some enterprises in iron and steel, cement, shipbuilding, toys and other industries decreased labor productivity, increased costs and overcapacity.

The GDP that currency can pull is decreasing considerably.

In 2015, the M2 growth rate reached 13.3%, but the economic growth rate was only 6.9%, a 25 year low.

Monetary efficiency declines and rattles in idling.

Money is still on the way, the situation has not improved, producing a large number of products that no one bought, this is the way to remove excess capacity and get rid of zombie enterprises.

If in the 90s of last century, we could join the WTO, stimulate real estate and automobile consumption, and raise the amount of money circulation to stimulate the economy.

Urban traffic chaos shows that car consumption has entered a bottleneck period. The international market has been unable to digest China's excess capacity. The three or four line cities' real estate inventory is not a short-term success. China needs institutional reform.

The elimination of zombie enterprises and anti-corruption is to remove high prices.

Ultimately, if productivity is improved, China's incorruptible will become the advantage of the system, which means that the cost of industry will be greatly reduced.

But there are also huge risks in this process. Investors have experienced the rise of risk from the stock market crash, the return of financial products and some credit default, and the risk will continue to rise in the future.

The debt ratio of Chinese enterprises has exceeded the warning line.

In January 19th, the New York Times wrote that in December 2015, the scale of China's social financing was 276 billion US dollars, an increase of 78% over November, the largest increase since June of the same year.

According to the Ministry of finance data, as at the end of 9 2015, the total liabilities of state owned enterprises totaled 77 trillion and 680 billion yuan, a sharp increase of 5 trillion and 930 billion yuan compared with the end of 8, and the total liabilities of state-owned enterprises in the first 9 months exceeded 11 trillion yuan.

The subtext of a cyclical and high investment cycle is that profits can be invested, but now the possibility of investment falling into a black hole is increasing. The decline in yield means a relative rise in investment costs, which will make investors more cautious or require higher returns to make up for the loss of risk.

The major economies in the world are largely deleveraging.

In tightening the cycle, we must ensure that the investment income is to control risks, the two is to control risks, and the three is to control risks.

The importance of finding new economic forces for accurate investment can only be ranked in the fourth place.