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Economics

中国特色的量化宽松?

Nov 30, 2022 Andrew Sheng and Xiao Geng

香港—2020年，美国外交关系委员会的塞巴斯蒂安·马拉比（Sebastian Mallaby）宣布，发达经济体将“重新定义其货币和财政能力的外部界限”，进入“神奇货币时代”。到2022年7月，马拉比预言这个时代即将结束。但是，尽管大多数主要央行现在都在逆转量化宽松(QE)并提高利率，但中国可能需要朝着相反的方向前进。

观察人士经常忽略，量化宽松是日本央行在2001年发明的，当时它是用来应对资产负债表通缩的工具。其他工具包括零利率和前瞻性政策指引。日本央行的资产负债表从2001年占GDP的20%扩大到2006年的30%，主要得益于购买日本政府债券。

然而，正如野村证券(Nomura)经济学家辜朝明(Richard Koo)在2010年观察到的那样，宽松的货币和财政政策并没有刺激企业和家庭投资或支出，因为他们仍然专注于修复自己受损的资产负债表。因此，在2015年，日本央行行长黑田东彦(Haruhiko Kuroda)推出了所谓的量化和质化宽松(QQE)。

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Andrew Sheng

Writing for PS since 2011
137 Commentaries

Andrew Sheng is a distinguished fellow at the Asia Global Institute at the University of Hong Kong.

Xiao Geng

Writing for PS since 2012
127 Commentaries

Xiao Geng, Chairman of the Hong Kong Institution for International Finance, is a professor and Director of the Institute of Policy and Practice at the Shenzhen Finance Institute at The Chinese University of Hong Kong, Shenzhen.

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vic lai Dec 1, 2022

Given
(i) China's recent eventual popping of her decades-long real-estate bubble in many of the country's major cities,
(ii) the particularly poor performance of her stock markets in the latest quarters, and
(iii) the country's very strict and persistent Covid lockdown policies,
the overall balance sheets of many Chinese households, the local governments, and public and private corporations have all been much damaged.
Since many of those economic entities are now already highly leveraged and indebted, especially many of the local governments that have always been relying too much on "Land Finance" to help support their own infrastructure constructions and to promote tax revenues, it's now no longer appropriate for the monetary authority to continue to use conventional (expansionary) monetary policies, like the latest lowering of the banks' RRR, to prevent the real GDP growth rate of the country from dropping further in the coming years.
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The PBOC, China's central bank, shouldn't and can't use the incurring of more non-central-government debts to help those already highly indebted Chinese economic entities to lower their net debt levels.
Hence, this time is really different in today's China, unconventional QE-like monetary policies are therefore called for, and should be boldly attempted by the PBOC, to more quickly and effectively help the highly indebted Chinese economic entities to finish repairing their much damaged balance sheets, and to prevent the country from falling into a decades-long Japan-like balance-sheet-repairing economic recession in the coming years.
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China's central government needs to incur more and more debts in the coming years (the debt level of the Chinese central government has always been harmfully too low in the past decades), by issuing more and more new central government (not local government) treasuries for the PBOC to buy, and the raised funds are then transferred to the country's local governments and other economic entities in a suitable manner, to help the latter to much taper their high leverage and debt ratios.
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Note that, when buying the debts of the country's economic entities in her new QE programs, the PBOC should avoid the mistakes made by Japan, and should learn from the US in the aftermath of the GFC of 2008-09, by mostly buying them more or less at their original face value, not at the much lower current market value.
It's now time to help, not to penalize, the "bad and naughty boys" in the country.
In particular, the PBOC should help restore the capital of the country's big and small commercial banks, and should also indirectly finance the coming IPOs of the country's hopeful SMEs, like the unicorns in the ICT sector.
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It's just like the US federal government's new-QE-financed massive check-giving after the breakout of the pandemic, which has
(i) made most of the balance sheets of the US's private sector now quite healthy relative to the past years,
(ii) much increased the supply of security financial assets and pristine collaterals (in the form of US federal government bills) highly demanded by the global financial markets.
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Once the slates are wiped clean, everything can start anew.
China's healthy commercial banking system can start lending en masse to the country's real-economy (non-real-estate) productive sectors, and then China can easily repeat her good old high economic growth rates in the coming years.
Once high economic growth is restored in China, the debt/GDP ratio will drop over time, and the country's debt problems will take care of themselves.
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- vic lai Dec 1, 2022
  
  Like the US federal government which, since the breakout of the pandemic, has been incurring "precariously" more and more federal deficits and debts of her own to help the country's private sector to much improve their own balance sheets and hence to much reduce the chance of realization of a serious recession in the country in the near future, today's Chinese central government should also do the same.
  By restoring the overall health of China's non-central-government sectors in one simple step in the near future, through the PBOC's new QE-like unconventional monetary programs and new forward guidance, President Xi's aim of "Common Prosperity" can much more easily be attained than otherwise.
  Considering the persistent geopolitical and Color-Revolution threats coming from the foreign countries, it's high time the Chinese authority seriously rescued or helped --- not further penalized --- the country's "naughty entrepreneurial boys."
  ---
  - vic lai Dec 1, 2022
    
    According to FT, as at the end of the third quarter this year, the overall leverage of China's real-economy sector was 273.9% of GDP, which is around 2.7 times of GDP.
    The estimated annual total interest repayment is around 10% of GDP, which is much higher than the recorded nominal GDP growth rate in recent years.
    So, the annual growth of China's GDP cake isn't even big enough to cope with her total interest expenses.
    The same will be, or is already, happening both in the US and in the EU as well.
    In particular, China's real estate and infrastructure investments should long have run into the problem of Diminishing Marginal Returns.
    ---
    But China's central and local governments are still owning lots of (sleeping) economic resources, so the future risk is still controllable for the Chinese government to suitably further increase her own leverage, to help lower the rate of increase in the leverage of the country's non-government sector.
    In order for the country's enterprise sector to deleverage, other sectors of the economy have to be giving support to it.
    Today's household leverage is already too high, so it's now necessary for the leverage of the Chinese government to become much higher than before.
    ---
    Since today's local government leverage is also quite high, the monetarily sovereign Chinese central government should suitably increase her own leverage over the coming years to help the country's numerous non-monetarily-sovereign and highly-indebted local governments to more easily deleverage.
    The incurrence of more and more debts by the central government, and hence the issuance of more and more new central government bills, notes and bonds in the coming decades, can also quickly enlarge and deepen the country's government treasury market, supplying more and more sorely-needed safety financial assets and pristine collaterals for all the financial markets in Asia, and preparing for the yuan's further Asianization along the OBOR Asian routes.
    ---
    In particular, China's vast amount of still-sleeping economic resources in the rural villages can be woken up to help the country's major cities to more easily deleverage in the coming years.
    ---
    - vic lai Dec 4, 2022
      
      Today, three seemingly "suicidal" economic policies continue to be precariously pursued by President Xi's new ruling government :
      (i) the country's very strict and persistent Covid lockdown policies, which have much obstructed the normal functioning of the country's macroeconomy in the past 3 years,
      (ii) the country's persistent anti-entrepreneurial common-prosperity policies in recent years,
      (iii) the PBOC's relatively tight monetary policies in the past decade, especially compared with that in the western countries.
      ---
      The 1990s is the decade during which the world's IT revolution formally and massively broke out in the US, but many of Japan's entrepreneurs at that time were still busy repairing their much damaged balance sheets as a result of the eventual massive popping of their economic bubbles in the beginning of the decade, and so the country had missed the golden opportunity to compete in the following global IT race.
      Germany, also the sickman of Europe in the 1990s, before the formal formation of the European Union and the use of the Euro in Europe, has similarly failed to actively participate in the new IT running race.
      China's new ruling government should do whatever it takes to avoid making the same mistake now and in the coming years.
      ---
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