Imagine that everyone's financial situation is a ledger. Your house, car, deposit, etc. are "assets" on the account, and loans and credit card bills are "liabilities".A healthy account should be sufficient assets and moderate liabilities.
A magnifying concept to the national economy at the macro level can explain the long -term decline of the Japanese economic bubble in the 1990s. This is the theory of "balance sheet decline" by Japanese economist Gu Chaoming.Similar stories in history have also been staged during the Great Depression in the United States and the 2008 financial crisis.
Since the reform and opening up, China's economy has experienced a high -speed growth of more than 30 years, and has entered the stage of medium -speed growth since 2010.Facing the impact of the epidemic, we not only see the increase in downward pressure on the economy, but also the complex adjustment of residents, enterprises and government's balance sheets. Behind this is a reflection of various mechanisms.
During the period of high economic growth, people's optimistic expected revenue continued to grow, and often overestimated their debt tolerance and increased liabilities.For example, China ’s new RMB 4 trillion (about S $ 760 billion) in 2009 stimulated the economy, which objectively expanded the scale of debt.The liabilities of the residential department are mainly driven by the real estate market. High house prices drive large -scale loans to buy houses. Each house price rises, and residential liabilities have also increased.The corporate sector is facing a cycle of low -income and high leverage, especially when traditional industries face weakened competitive advantages and declining investment marginal income, enterprises maintain their operation through "borrowing new debts to pay off old debt" and accumulated debt.With the incomplete investment impulse of local governments and the incomplete mechanism of financial institutions, hidden debt expands rapidly.
In the process, the role of the real estate market cannot be ignored.Real estate is not only the main assets of the family, but also a common mortgage for corporate loans.Land transfer income and real estate -related taxes are the source of nearly half financial resources of local governments.In recent years, with the changes in population growth and the process of urbanization, the supply and demand relationship of the real estate market has changed.Especially since the second half of 2021, the real estate market has changed the expectations of "only rising or not," which has caused the cash flow income of real estate companies to be affected, and some companies even have debt defaults.
The problem of economic structural imbalances is also prominent. If the capacity of overcapacity in the real economy and the decline in profit margins, funds are therefore flowing to the financial and real estate markets that seek higher returns, thereby pushing up the leverage.To this end, China has begun to promote supply -side structural reforms and deleveraging since 2016 to curb the rapid rise in leverage.
The impact of the epidemic also leads to structural damage to the balance sheet.Although the debt of various departments has not contracted on average, low -income families, small and micro enterprises, and individual local governments have seriously damaged asset liabilities.
Staff from non -finance to the financial system
When a large number of residents, enterprises, and the government have problems with the balance sheet of the government, the entire economy is like an injured giant, the value of assets shrinks, and liabilities are increasing.The residents' income and asset value of the residents are no longer at ease, and their willingness and investment capacity have fallen sharply, and they have moved towards "preventive savings"; companies have found that the value of asset value has shrunk and the liability rate has increased. New investment and expansion have become extravagant. The governmentIt has also been found that taxation is reduced and rigid expenditures are still huge, and the motivation to expand investment will also weaken.In short, in order to reduce the cost of liabilities, the economic subject has changed from the previous pursuit of "maximum income" to "liability minimization".Once these behaviors change become a common phenomenon, it may be transmitted from the micro level to the macro level, and even from the non -financial system to the financial system, bringing deeper and longer harm than traditional economic recession.
So how should macro policies be found to find the key to economic recovery?The author believes that the key is to repair the balance sheet.
In the current situation, an effective method is to implement positive fiscal policies and inject the necessary "source living water" into the economic system.In this process, the central government can use its lower leverage advantage to appropriately increase debt and help enterprises and residential departments to relieve stress, such as subsidizing low -income families, and issuing digital RMB used in a certain scale to promote consumption; Given GiveYouth families issuing maternity subsidies can not only inspire fertility, but also stimulate consumption and provide motivation for economic recovery.
For enterprises, especially small and micro enterprises, the government can help small and micro enterprises to restore their vitality through measures such as tax cuts and rents, and increase and create employment opportunities.
For local governments, under the premise of strict discipline, measures to handle existing debt, revitalize existing assets such as real estate, and provide affordable housing can not only improve people's livelihood, but also help restore and maintain market confidence.
Through these macro policies, it can win time and space for market entities to repair the balance sheet, and then promote the gradual recovery of the economy.At the same time, strengthening the cooperation of monetary policy and fiscal policy, such as moderate interest rate cuts, will help reduce the burden of interest and financing costs of the whole society.Increased policy efforts on demand, such as further loosening purchase restrictions, will help promote the gradual recovery of the real estate market.Economic recovery is a long -term and arduous task, and the government, market, enterprises and the public work together.In the process, government policy support is particularly critical.
The author is an assistant professor at the National University of Singapore
Special Expert of China Forum, Tsinghua University Strategy and Security Center
