The depth of analysis of financial idle hazard: the financial crisis is not far away?

Review: China return on investment in the real economy has continued below the cost of financing in 2014. Latin American countries have a financial crisis at the intersection of the left about a year's time, the Japanese financial crisis at this point on the right side of about 5-6 years. Br; /> <
Br; /> <
After 2014, China's economic and financial field appeared many unusual phenomenon, capital fled economic entity, to financial sector idling phenomenon gradually. We call it an unusual year in 2014, because in this year, China's economic growth and financial markets have had some intriguing changes. Unusual one: before 2014, a positive correlation between the Shanghai Composite Index and the fundamentals of the Chinese economy +57%; after 2014, between stock market and economic fundamentals negative correlation (-52%) & lt; br />
Br; /> <
Br; /> <
Br; /> <
Unusual two: 2014, the national real estate supply and demand ratio of the overall peak, showing a gradual downward trend in the next five years, the country's real estate is no longer so scarce.
Br; /> <
Nbsp; &

We find that the effect of the capital market, the real estate market and the monetary policy has changed since 2014. These unusual changes behind, implicit in China's economic fundamentals have emerged some of the changes in the system.
Why in 2014 there is a lot of unusual phenomenon: the real economic investment rate of return continued to lower than the actual financing costs, the economy may gradually fall into ldquo; & POND'S growth & rdquo; stage. A series of financial risk chaos, the deep essence lies in the contradiction between the actual financing costs of continuing down the real economy capital return rate and high. A typical feature of this stage: (1) funds do not want into the real economy, the traditional; (2) structural differentiation, & amp; rdquo; old economic & amp; rdquo; (coal, nonferrous metals, steel, infrastructure and so on) industry gradually into debt predicament; & amp; rdquo; new economy (ecke, net(information) rdquo; & industry bubble; (3) the capital market is mainly driven by liquidity and risk appetite, rather than the fundamentals; capital market volatility increased, financial risk is also increased.
The underlying causes of the economic fundamentals, making China's overall financial risk increased, and in various fields gradually appear in various fields. If the financial regulators were dispersed to deal with, but the general effect may be constantly on the run. We believe that after 2014 financial markets appear unusual change, you first need to clarify the present stage of our country facing the main financial risks and the logic behind, at what stage, risk of various forms.
The return on investment in the real economy continued to lower than the cost of financing since 2014.

Source: National Bureau of statistics.
According to former Federal Reserve Chairman Bernanke's research, a country's financial risk is likely to spill over and magnify the volatility of the real economy, thus affecting the economic cycle, and even cause economic recession. China's economy is gradually entering the new normal, in this period, the economic growth from high-speed to high-speed. Under the new normal, on the one hand, the traditional periodic plate facing the pressure of excess capacity, market clearing the increasing demand, which implies the potential financial risks. On the one hand, the new economic growth areas and the development of new things are often the lack of norms, some industries & ldquo; barbaric growth rdquo; & also caused the financial stability of the hidden dangers. Under the new normal financial risks, at present, is a new topic, but also a problem that can not be avoided in the further reform and development of our country.
We believe that the underlying nature of China's financial risk lies in the contradiction between the continuous economic return on the real economy and the high real cost of financing. Simply discuss the significance of financial risk is not, must be combined with the operational phase of the real economy in order to get a reasonable and objective judgment. With China's entry into the new normal stage, the real economic return on capital gradually down. However, with the deepening of interest rate liberalization and financial liberalization reform, the actual financing costs and gradually rise or remain high.
First of all, from Japan, Latin America and other international experience in the financial crisis, the economic return of the real economy and the high rate of return on the actual cost of financing between the intersection point is of great significance. After this intersection, means that the entity economic capital return rate is less than the cost of capital, economy will gradually into a & amp; ldquo; Pang's growth & amp; rdquo;, that is a return of capital not finance the interest expense, financial risks gradually exposed. Latin American countries have a financial crisis at the intersection of the left about a year's time, mainly due to the opening of the Latin American capital account, while a large number of short-term international debt depends on. Japan's financial crisis at the right side of the intersection of about 5-6 years, mainly due to the mutual guarantee of corporate culture between Japan and large enterprises, banks led the financial structure of financial risk and then broke out.
Japan in the return on investment and financing costs at the intersection of 5-6 years after the outbreak of the financial crisis

Source: CEIC.
Second, China's current real economic rate of return has declined year by year, to the end of 2015 has dropped below 5%, lower than the cost of the real economy financing. In fact, as early as the end of 2014, China's real economic capital rate of return curve has been with China's real economic financing cost curve cross, representing the economy may fall into & ldquo; Pang's growth & rdquo;. Specifically, the relevant research data show that 52% of the new credit expansion for the main body of the main economic debt service, only a small part of the liquidity into the real economy. At the same time, if estimates since 2008 each industry unit added value of credit density (industry to increase value / industry credit), we found that density of credit construction, steel, nonferrous metals, chemicals, coal and other industries is growing the fastest. However, these industry return on net capital rate is worrying.
Third, China's financial risks have been gradually exposed, but when the financial crisis depends on the future of economic reform and financial reform. China bank leading financial structure similar to that of Japan, strong government and state-owned enterprises to control the strong in Japan, so we judge, financial risks in China's possible time points later than that of Japan. If we seize the opportunity in this time, accelerate the reform of the supply side and the reform of the financial system, it is expected to avoid the financial crisis, the real economic return on capital to the cost of capital.
Reveals the development trend of China's financial risk, and the specific performance of China's financial risk is more accurate and realistic. China's financial risk is more serious in the following areas:
(1) the high debt of non financial enterprises. The leverage ratio of non financial enterprises in China reached a record 152% at the end of 2015, ranking first in the world. After the global financial crisis of 2008, the corresponding & amp; ldquo; trillion & amp; rdquo; protect the investment growth of the call, state-owned enterprises set off a trend of increase leverage investment in a new round of, but then leverage of private enterprises is still low. With the advent of the financial disintermediation of the development and diversification of financial instruments, the private enterprise's overall leverage rate in recent years has accelerated rise. Then, carefully examine the profitability of state-owned enterprises and private enterprises growth we can found that earnings growth of the state-owned sector of the sharp decline in profit growth of private enterprises more is achieved through the extension of the mergers and acquisitions, and is not practical in students growth. Non financial enterprise's liabilities rise, the relative profitability and potential under the, with the correct direction of development to solve the problems encountered in the development.
Nbsp; &