Research On The Effect Of Fiscal Policy On The Leverage Of Upstream Industry In China

In recent years,the leverage ratio of China’s non-financial sector has been steadily rising.The rising leverage in the non-financial sector is likely to trigger systemic financial risks and affect the steady development of the economy.Therefore,the higher leverage in the non-financial sector has become an important issue urgently needed by the Chinese government.In order to effectively mitigate the leverage risk existing in the non-financial enterprise sector,the government has formulated a supply-side structural reform policy with "deleveraging" as the core.However,in the context of deleveraging,only by grasping the major causes of high leverage in the non-financial corporate sector can we effectively and effectively resolve the high leverage problem in the non-financial corporate sector in China,There are many reasons for the higher non-financial sector leverage,but the role of fiscal policy in it is often overlooked.Since China established the socialist maret system with Chinese characteristics,the government has played an important role in stabilizing the economy.However,it is undeniable that the implementation of fiscal policies has also had some negative impact on the economic system.In particular,in 2008,in response to the world economic crisis and helping the economy to get to the bottom,the Chinese government implemented a large-scale fiscal stimulus policy.However,the negative impact brought by ’ 4 trillion’ has also received widespread attention.This article believes that a direct impact of the large-scale fiscal stimulus policy with ’4 trillion’ on the Chinese economy is to increase the leverage ratio of the non-financial corporate sector in China,especially the leverage ratio of the upstream industry chain.This is because the government’s large-scale fiscal expenditure is mainly focused on investing in constructive spending.With the government investment in constructive spending increases,the government demand for products in the upstream industry chain will be significantly increased.As the demand for products increases and prices increase,the capital return rate and investment demand of the upstream industry chain will increase rapidly.This will increase the credit demand of the upper reaches of the industry chain,and it will easily increase its leverage ratio.Combined with the current leverage distribution in China,we can see that the current high leverage in China is also mainly concentrated in the upstream industry chain.Therefore,studying the impact of fiscal policy on the leverage ratio of China’s non-financial corporate sector is crucial to clarifying the reasons for high leverage.On this basis,it will also have important theoretical and practical significance to explore how to reform and use fiscal policies to achieve the goal of deleveraging.Therefore,from the perspective of fiscal policy,this paper attempts to study the impact of fiscal policy on the leverage ratio of the non-financial corporate sector,especially the upstream industry chain,and find a micro-mechanism for the impact of fiscal policy on the economic system.And on the basis of reflection on the implementation of the traditional fiscal policy,and provide a certain basis for the implementation of China’s deleveraging policy.This paper mainly includes the following parts:The first part is an introduction,which is a general description of the research background,research significance,research methods and other aspects of the research topic of this article "the fiscal policy and the non-financial enterprise sector leverage ratio";the second part is a literature review.This article summarizes the existing studies from four aspects:the negative impact of high leverage on the economy,the reasons for the non-financial sector being highly leveraged,the highly leveraged structural distribution and de-leveraged policy measures;the third part is the analysis of the characteristics of financial policy on the leverage ratio of non-financial enterprise sector.This paper sorts out the evolution of China’s fiscal policy since 1993,the structural characteristics of the evolution of the leverage ratio of China’s non-financial corporate sector,and conducts empirical analysis of how the fiscal policy affects the leverage of upstream industries;the fourth part studies the effect of fiscal policy on the direct influence of industry leverage on the industry chain.In this part,we construct a dynamic stochastic general equilibrium model characterized by capital intensity difference,vertical industry relation and limited competition financial market,and make a study on how the constructive expenditure of government investment influences the leverage ratio of the upstream industry chain on the demand side Detailed theoretical analysis and empirical analysis of the facts;From the perspective of the supply side,the fifth part studies how the fiscal policy indirectly influences the leverage ratio of the upstream industry chain through the supply side.In this section,the market entry of companies is incorporated into the dynamic stochastic general equilibrium model.The analysis of the demand for fiscal policy has not only increased the profitability of upstream industries,but also caused large-scale market entry of upstream industries,further pulling from the supply side.The sixth part studies the effect of fiscal policy on the enlargement of leverage in upstream industries in the background of price self-cycle effect.In this section,the input-output network is included in the analysis framework of the dynamic ’stochastic general equilibrium model.A detailed analysis of the amplification effect of price self-recycling is carried out.The seventh part studies how to implement policies in the context of deleveraging.This section discusses how to deleverage from the internal structural adjustment of fiscal expenditures,how to adjust the negative impact of industrial policy weakening the financial policy on the leverage ratio of the upstream industry chain,and how to implement leveraged transfer to improve the fiscal policy operation space.The last part summarizes the main points of this paper,the conclusion of the research and the related policy recommendations based on this.Specifically,the study of this paper has drawn the following main points:First,when the government spending on constructive spending expanded,the leverage of state-owned enterprises at the upper reaches of the industrial chain increased rapidly and sharply,while that of private enterprises at the lower reaches of the industrial chain decreased sharply and then increased slightly.During the expansion of guaranteed expenditures,the level of leverage of private enterprises in the downstream of the industrial chain has increased rapidly,while the level of leverage of state-owned enterprises in the upper reaches of the industry chain has shown a moderate increase.At present,the level of leverage of China’s state-owned enterprises is higher overall,while the level of leverage of private enterprises is overall lower,and the investment demand of private enterprises is sluggish.Improving the leverage of private enterprises in the downstream of the industrial chain can promote the increase of investment demand of private enterprises and promote the capacity utilization of state-owned enterprises in the upstream of the industrial chain,but will not cause the level of leverage of state-owned enterprises to increase substantially.Moreover,the increase in capacity utilization will increase the leverage of state-owned enterprises,thereby reducing the risk of debt defaults by state-owned enterprises.Therefore,under the current structural reform of the supply side,the government should optimize the fiscal expenditure structure and implement the fiscal expansion policy with guaranteed expenditure as the core,on the basis of controlling and reducing the leverage of state-owned enterprises.Second,as the government fiscal policy stimulates demand in the market,leading to higher prices and higher profit margins in upstream industries,it also causes a huge output gap in the supply of upstream industries.In order to curb price increases and narrow the output gap caused by the upstream industries,the government will relax the access control to the upstream industries.With the attraction of high demand,high prices,and high profit margins,"surge-type" market entry phenomenon will occur in the upper reaches of the industrial chain.The emergence of "tidal" markets on the supply side has increased the investment demand and credit demand in upstream industries.Moreover,stimulated by high profit margins,commercial banks are also more inclined to provide financial support to enterprises in the upstream industry chain,which further increases the leverage of upstream industries in the supply chain.Therefore,the government fiscal policy will indirectly affect the leverage of upstream industries through the supply side.More importantly,the "surge-type" market that has arisen from the supply side due to fiscal policy will often lead to overcapacity in upstream industries,which will reduce the profitability of upstream industries.After this,the upper reaches of the industry chain are more inclined to borrow new debt to pay back old debt,so that the upper reaches of the industry chain will face a passive increase in leverage.Third,upstream and downstream industries all have a certain "price self-recycling"effect,that is,prices are more conductive in the upper reaches of the upstream industry or downstream industries,and less vertical transmission along the industrial chain,and "price self-recycling" The effect acts as an amplifier.The effect of "price self-cycle" is stronger and the industry’s overall price volatility will become more sensitive from the industry chain.Overall,the "price self-cycle" effect in the upstream industry is more evident.Compared with the downstream industries,there are still higher market forces in the upstream industry.Therefore,under the combined effect of "price self-cycle" effect and heterogeneous market forces,the stimulus of fiscal policy will have a greater impact on the price of the upstream industries,resulting in greater volatility in the price level of the upstream industries.At the same time,the greater volatility of prices will also lead to greater volatility in the capital return rate,investment and credit scale,and leverage ratio of the upstream industry chain,thereby amplifying the impact of fiscal policy on the upstream industry leverage ratio.Fourthly,in the context of deleveraging,the government should also properly adjust the market structure of the upstream industries in the industry chain,reduce barriers to market entry in the upstream industries and maintain supply flexibility in the upstream industries.Only in this way,fiscal policy stimulus will not have a significant impact on the upstream industry prices,return on capital,profit margins.The return on capital and profitability are important factors affecting the leverage ratio.If the upstream industry’s return on capital,profit margins do not appear drastic changes,even if the implementation of large-scale fiscal stimulus,the upstream industry’s leverage ratio will not change significantly.In addition,in the context of the current high level of leverage in the upstream industry,traditional fiscal policy has limited operational space.Therefore,the government should also shift the lever moderately,so as to improve the operational space for fiscal policy.