China'S Economic Pformation Is Extremely Difficult.

Faced with the downward pressure of China's economy, the government and economists are exploring the causes and finding a way out.

Recently, a study by the bank for International Settlements (BIS) has suggested that there is a "risk triangle" phenomenon in many countries: the decline in productivity, the increase in leverage and the narrowing of policy space.

The warning of productivity decline has caught the key problem of the current global economic downturn.

It is undeniable that productivity comes from two aspects of input and output. Besides production factors, input is also an important motivation.

Huang Yiping, vice president of the National Development Research Institute of Peking University and member of the monetary policy committee of the central bank, believe that these three problems seem to exist in the current Chinese economy.

He pointed out that the current state owned enterprises' leverage and the deleveraging of private enterprises are worrying.

The quality of leverage is decreasing, which not only reduces productivity, but also reduces policy space. China is facing the dilemma of "risk iron triangle".

To solve this problem, enterprises need to improve their investment efficiency.

In this regard, there is another analytical perspective for global productivity decline, which is global capital surplus.

Because the reduction of productivity can actually mean the huge investment, but the effect is smaller.

This can be understood from the production process as a reduction in input output efficiency or in a broader sense as a reduction in capital efficiency.

The global capital surplus reduces productivity from two aspects. One is that the global capital is overrun, enlarging the total amount of capital needed for the economic operation and reducing the return of the whole society capital. The two is the global capital.

As a result, capital can only rely on bubble investment and take huge risks to seek higher capital returns. At the same time, capital gradually decreases in the real economy, leading to a further reduction in global productivity.

From a policy point of view, debt expansion and deficit increase can lead to capital surplus and lower productivity when economic structure and efficiency remain unchanged.

In China's case, the National Bureau of statistics data show that in 2015, China's labor productivity growth rate was 6.6%, the lowest since 1999.

Labor productivity is highly correlated with economic growth. From the world average level, the growth rate of labor productivity accelerates, and the economic growth rate also accelerates. The growth rate of labor productivity slows down when the growth rate of labor productivity slows down.

Zhang Ping, deputy director of the Chinese Academy of Social Sciences, believes that the slowdown in China's economy is a structural slowdown.

For example, labor supply has declined over the years, and the labor participation rate of young people has declined.

In addition, the decline in investment returns in traditional industries and the inactive investment in private enterprises all made the economy slow down obviously.

The biggest problem is that China's economy is dominated by the service sector, but the productivity of the service sector is growing slowly.

It should be pointed out that the current economic pformation in China and the promotion of TFP have internal consistency. If TFP continues to decline, it is enough to show that China's economic pformation is very difficult.

In fact, not only is China falling into a downturn in productivity growth, but the United States is also facing the same problem.

Us labor department data showed that the US non farm productivity fell 0.6% in the two quarter, the three consecutive quarterly decline, the longest decline since 70s.

It is worth mentioning that in recent years, a large number of investments in China have been ineffective investment as labor productivity has decreased.

The National Statistical Yearbook reflects this point. For example, the ratio of investment to fixed capital formation in 2000 is 1: 0.98, that is, 1 yuan investment can create GDP of 0.98 yuan.

But by 2014, the investment of 1.82 yuan can create 1 yuan GDP.

Meanwhile, the scale of local government borrowing has been amazing in recent two years.

Recently, institutional analysts have been sorting out the scale of local borrowing: since 2015, the total borrowing of local governments has totaled 12 trillion and 860 billion yuan, a net increase of 10 trillion and 850 billion yuan in 2 years.

Among them, the local debt issue is 9 trillion and 200 billion yuan, and the city investment bond is 3 trillion and 660 billion yuan.

The increase in debt makes financial risk rise.

According to the analysis report issued by the international rating agency, S & P on October 20th, based on the 50 largest banks in China, China's domestic bank credit has increased rapidly since the beginning of last year.

The surge in credit and narrowing of spreads may temporarily relieve pressure on bank credit losses.

However, with the

The surge has intensified the pressure on asset quality, capital and liquidity of banks, and any major problems of these interrelated indicators may cause banks to get into trouble.

S & P noted in particular that the pressure may be more significant for some business radical banks increasingly relying on wholesale financing, including interbank repurchase, broker deposits, interbank loans and commercial bills.

The risk of such funds is that once the market has negative news, banks participating in wholesale financing can not extend their financing so as to quickly withdraw funds.

Earlier, Moodie, a rating agency, had warned the small and medium-sized banks which significantly relied on wholesale financing. The increase in short-term wholesale financing would expose them to the high risk of mismatch of assets and liabilities and the interruption of capital chain, and the banks that widely used short-term wholesale financing would face greater negative rating pressure.

As Lu Ming, a distinguished professor of Shanghai Jiao Tong University and director of the China Development Research Center, said, the problems of China's economy are mainly structural and institutional, and the decline of economic growth should not be attributed to the usual economic cycle.

If we do not make structural reforms but take monetary and fiscal stimulus on the aggregate, the economic resources, including social capital, will be more occupied by the low return areas, such as the return of farmers to venture, the ineffective investment in the outflow of population, and the non social sectors such as local governments and state-owned enterprises.

The result of implementing this policy is that volume expansion exacerbates structural distortions.

In addition, China's financial markets have mixed up with what fiscal should do and what commercial finance should do.

The commercial financial market should allocate resources according to the rate of return, but the financing and lending of commercial banks to state-owned enterprises and local governments are not operated according to the rate of return, but also guaranteed by governments at all levels.

In Lu Ming's view, this allows those low cost to get.

The state-owned enterprises will get arbitrage subsidies by means of entrusted loans and so on.

All these have led to small and medium enterprises financing difficulties, financing expensive.

There is no doubt that these problems mentioned by Lu Ming are indeed important factors that distort the domestic economic structure and resource allocation for a long time, and also bring a lot of inefficient and inefficient investment, and make many effective demands of domestic residents unsatisfied.

To solve the problem of stalling in China's economic growth, we must correct structural problems and resource mismatches, including making commercial finance do what it should do.

In addition, if Li Yang, director of the Economics Department of the Chinese Academy of Social Sciences and director of the national finance and development laboratory, said that China's economy will enter a period of long-term structural adjustment, the key to economic growth in the future is to improve labour productivity in an all-round way.