The Characteristics,Influence Factors And Regulation Strategies Of China's Leverage Ratio

In recent years,China's economic growth continued to move down.But China's total social leverage ratio rose rapidly,not only significantly higher than its own historical level,but also higher than in emerging and advanced economies.The financial industry and overseas investors pay close attention to China's debt problem as a potential trigger for China's economic risks.BIS,the IMF and other institutions have frequently issued warnings.These warnings deserve attention.However,there is no inevitable correlation between high leverage and economic crisis,and it should be viewed dialectically in the light of China's specific national conditions.Therefore,based on the actual situation of China's economic development,this paper makes a systematic research on the characteristics,causes and regulation countermeasures of China's leverage ratio.The empirical analysis of this paper is divided into 6 parts:In the first part,the current methods are used to measure the leverage ratio in China.From the point of view of the total leverage ratio,the problem of leverage in our country is not only manifested as higher level,but also rising too fast.From the structural characteristics of leverage,the leverage of non-financial enterprises sector is the highest,and the rise is also the largest.The leverage of government sector has continued to rise,but the upward momentum has been slow,with absolute level significantly lower than in major economies.Although the level of China's resident sector leverage is not high,it needs to be paid attention because of a faster rate.Finally,from the regional characteristics of leverage ratio,the trend of the change in each province is very different before and after 2008.The performance of leverage ratio before 2008 is slow down or slow rise,while a rapid rise after 2008.On the other hand,the western provinces have the highest level of leverage ratio overall and the fastest growth rate.In the second part,this paper focuses on the effect of economic environment change on leverage ratio based on macroscopic perspective.This paper first constructs a common VAR model to carry on the preliminary research.The impulse response shows that there is a negative correlation between the macro leverage ratio and the economic growth,as well as the inflation,which means that the recovery of economic environment can significantly inhibit the macro leverage ratio rise.Using the financial crisis as the boundary to divide the sub-samples and then re-estimating,it is found that the effect of the economic environment on the macro leverage has increased significantly after the financial crisis.In view of this,this paper uses TVP-VAR model to capture the time-varying characteristics of the effect of economic environment on macroscopic leverage.The conclusion of the equal interval impulse response is consistent with the VAR model.The results of the point-in-hour impulse response show that the negative impact of economic growth and inflation on macro leverage is the most significant in the current stage,which means that the economic environment of “low growth and low inflation" in the current stage drives the rapid rise of China's leverage ratio.In the third part,this paper analyzes the influence mechanism of economic environment change on leverage in China based on microscopic perspective.The calculation method of macro leverage ratio of enterprise department is decomposed,and it is found that the interest-bearing debt ratio and asset turnover ratio of enterprises are the factors that affect the macro leverage of enterprise sector.And the asset turnover of sample companies has plummeted in recent years.Therefore,under the background of small change in the debt ratio of micro enterprises,the sharp decline of enterprise asset turnover ratio may be an important reason for the rapid rise of macro leverage in China's enterprise sector.This paper draws on the classical literatures,puts forward three hypotheses,and then uses the panel fixed effect model to verify these three hypotheses.Empirical results show that the interest-bearing debt ratio of enterprises is negatively correlated with the macroeconomic environment(economic growth and inflation),while the turnover of enterprise is positively correlated with the macroeconomic environment.This means that "low growth,low inflation" economic environment has led to the rise of China's micro-enterprise debt ratio in recent years,and also led to the decline of enterprise asset turnover ratio.The two promote the rapid rise of macro leverage in China's enterprise sector.The conclusions of this part and the previous part can confirm each other,and have a further insight into the internal mechanism of the macroeconomic environment on the enterprise sector leverage.In the fourth part,the threshold model is used to verify the nonlinear characteristics of the influence mechanism of total and provincial leverage on economic growth.This paper first uses T-SVAR model to verify the nonlinear effect of total leverage on economic growth.The results show that moderate leverage can play a positive role in promoting economic growth,while excessive leverage can have a negative impact on economic growth.Next,this paper uses the panel threshold model to verify the nonlinear correlation mechanism between regional economic growth and provincial leverage.The results of threshold effect test show that the coefficient of leverage is significantly positive in the low level,which indicates that leveraging can drive the regional economic growth when the leverage is low.In the middle and high level,the coefficient of leverage is negative(the coefficient of middle level is not significant),indicating that continued leveraging when leverage ratio exceed a certain threshold will drag down regional economic growth.It should be stated that,the leverage ratio of the provinces in recent years have exceeded the second threshold(0.9888)without exception.This means that not individual provinces have too much leverage and that there is a tendency for excessive leverage in all provinces.Among them,the western provinces have the most serious average degree of leveraging.In the fifth part,this paper verifies the feasibility of intersectoral structural rebalancing of leverage ratio in China.In consideration of the characteristics of China's leverage,it may have operational space for intersectoral structural rebalancing: increase the leverage ratio of the resident and government sectors(especially the central government sector)appropriately,and subject to a reduction in the leverage of the non-financial enterprise sector,so as to achieve a steady decline in social total leverage and the smooth operation of the economic and financial system.The empirical results show that the operational space of the structural rebalancing is very limited.First of all,after the global financial crisis,China's government leverage ratio has been in a high level and has had a dampening effect on China's economic growth.This means that there is no space for leveraging in our government sector as a whole.However,considering that our central government has a large number of assets that can provide collateral for government debt,while the central government's leverage is still at a low level,this paper holds that government leverage still has the operational space of internal structure optimization.That is to reduce the leverage ratio of local governments appropriately and increase the one of the central government.The former is conducive to preventing and defusing debt risk.The latter can provide support for China's economic growth.Secondly,from the perspective of resident departments,the empirical results of this paper show that the effect of household's leverage on the change of total expenditure and consumption expenditure is significantly negative,which means that the increase of household's leverage will have a inhibitory effect on household consumption.From the impact of household's leverage on household consumption structure,the rise in household's leverage will not affect household survival consumption expenditure,but will significantly inhibit the growth of development and enjoyment of consumer spending.It means that residents leveraging is not conducive to the upgrading of residents' consumption.Therefore,the idea of boosting consumption growth by increasing the leverage ratio of the resident sector is not achievable.In the sixth part,this paper analyzes and compares the effects of various monetary policy instruments and fiscal policy instruments on leverage and economic growth.First of all,from the effect of monetary policy,monetary expansion can promote economic growth and boost inflation,while the disadvantage is that it will further increase the leverage ratio of the real sector.Higher interest rates can significantly reduce the leverage ratio of the real sector,but will further increase the downward pressure of the economy and the risk of deflation.So it is not conducive to steady economic growth.This means that relying solely on monetary policy to achieve "steady growth" and "deleveraging" is not ideal,and neither loose monetary policy nor tight is feasible.Secondly,from the effect of fiscal policy,it has more room to play than monetary policy in the current economic situation.The implementation of tax cuts and fee reduction policies and the expansion of fiscal investment spending can not only effectively reduce the leverage ratio of economic entities,but also significantly promote economic growth,so as to achieve the twin goals of "steady growth" and "deleveraging".Therefore,under the current deleveraging background,monetary policy and fiscal policy should coordinate and cooperate.Monetary policy should remain robust and neutral,manage the monetary aggregates,control macroeconomic leverage and systemic risks,and create a neutral and moderate policy environment for transforming the mode of economic development,optimizing the economic structure and transforming the growth momentum.Fiscal policy should maintain positive and effective,implement tax reduction policy and expand fiscal expenditure,especially investment expenditure,to stimulate the vitality of micro-subject and underpin economic growth.