Credit Expansion And Corporate Investments And Financing

Concerning the long-term structural imbalance of China's economy,this paper cuts through the huge credit resources flowing into the market from 2009 to 2010,and analyzes the heterogeneity of corporate investment and financing under the impact of credit expansion,and further explore the economic consequences of credit expansion.The paper focuses on the microscopic transmission mechanism of credit expansion and finds out that:(1)Enterprises with more credit support have access to more long-term credit funds,and their total credit funds have also expanded under the expansion policy.(2)The investment of some enterprises has declined,though they have large amount of credit resources.Further exploration of the reasons for the investment decline reveals that enterprises have re-lending behaviors,which means that the upcoming credit funds are provided to other companies in the market to earn high interest income.The conclusions of this paper have a good explanatory power for the pain points of the current China's economy:(1)Enterprises with strong investment demand don't have much credit inclination,but enterprises with credit support have no good investment opportunities.Such credit mismatches and resource distortions are magnified under the expansion credit policy,and they expose the aesthetic defects of China's banking system.That is,banks provide funds for the enterprises from the perspective of the creditor,and pays too much attention to the short-term income instead of the long-term development of the enterprise.This also provides a possible explanation for the fact that the total social investment shows a downward trend,when Chinese government injects vitality into the economy through banking channels.(2)Due to the mismatch of credit funds,the financing needs that enterprises can't complete in the formal financial system are realized in the shadow banking,though at a higher cost.In the short term,this seems to be a Pareto optimization,but in the long run,because of the opacity of the shadow banking's capital flow,the operational efficiency of China's economy will decline,much due to the accumulation of hidden financial risks.(3)For a healthy economy,the elimination of backward production capacity is completed in the way of bankruptcy caused by the lack of money.With the pressure of industrial upgrading,enterprises that can continue receiving credit funds from commercial banks or shadow banking cannot be eliminated in this way,which further leads to zombie enterprises,resulting in overcapacity.Importantly,for the fact that the market is unable to automatically clear out backward production capacity,Chinese government have proposed the goal of "de-capacity"in the supply-side structural reforms,hoping to maintain the vitality of China's economy through self-rescue actions of actively reducing backward production capacity.It can be seen that the negative impact of credit funds mismatch on China's economy is sustained and far-reaching.In all,the paper not only provides strong micro evidence for the policy effect of credit expansion,but also gives a possible explanation for the current structural imbalance of China's economy,and provide effective advice for the long-term sustainable development of China.