I. Overview of China's financial assets structure

China's financial assets are mainly divided into: cash in circulation, deposits from financial institutions, loans from financial institutions, and securities (bonds, stocks, etc.). Table 1 lists the distribution of major financial assets in China in 1978, 1986, 1991 and 1995 (see Table 1).

Since the reform and opening up, China's financial assets have developed from single bank assets to marketization and diversification. From 1981 to 1995, a total of 479.439 billion yuan of government bonds, 31.398 billion yuan of national investment bonds and investment company bonds, 118.297 billion yuan of financial institution bonds, 173.83 billion yuan of corporate bonds, 11.956 billion yuan of stocks (par value of A shares) and 179.628 billion yuan of certificates of deposit were issued (China Securities Regulatory Commission, 1995). The appearance of these financial instruments laid a foundation for the further development of China's money market and capital market. However, most of China's financial assets are still deposits and loans from banks and financial institutions. The ratio of deposits and loans of banks and financial institutions to total financial assets was 93% in 1978, 87% in 1986, 84% in 1991 and 83% in 1995. Although the proportion has been declining since the reform and opening up, it has been declining slowly since the 199s, which shows that the development of China's money market and capital market is not satisfactory. The proportion of total financial assets in China's gross national product rose from 94% in 1978 to 221% in 1995, reflecting the process of financial deepening (monetization) in the economic system reform. In the 198s, this proportion rose rapidly, but in the 199s, the rising speed slowed down.

The main body of savings in China has also changed in the reform, from the former government and state-owned enterprises to the common people now. According to the World Bank experts' estimation, the proportion of government accumulation in China's total accumulation has been above 7% before the reform. In 1978, domestic savings accounted for 35.5% of the gross national product, of which household savings accounted for 1.2%, government savings accounted for 15.4%, and enterprise savings accounted for 18.9%. In other words, 96.7% of the total social savings in 1978 came from the government and state-owned enterprises. At the end of 1978, the savings balance of China residents was only 21.6 billion yuan, accounting for 5.9% of the gross national product and 16.2% of the total social deposits.

before the reform, the state was the main body of savings and investment, so there was no need for financial intermediaries. State-owned fixed assets investment mainly comes from financial allocation, and bank loans are mainly used as working capital. Bank loans also mainly come from deposits of the government and state-owned enterprises and institutions. In 1978, the sum of enterprise deposits and financial deposits was 18.99 billion yuan, accounting for 83.8% of the total bank deposits.

At the end of p>1995, the balance of deposits in financial institutions in China was 5.4 trillion yuan, of which nearly 3 trillion yuan was residents' savings. Savers and investors are separated. The biggest savers are ordinary people and the biggest investors are the state. The intermediary role of banks and financial institutions has become very important. Through the control of banks and financial institutions, the state invests in the construction of state-owned enterprises with the money of ordinary people. Therefore, the real owners of state-owned enterprises can be said to be ordinary people who deposit in national banks.

the macro financial asset structure will inevitably be reflected in the asset-liability structure of enterprises. Loans from banks and financial institutions are the main source of funds for enterprises in China. It is difficult for enterprises to obtain funds by issuing bonds, stocks and other direct financing methods. Corporate bonds were issued in 1986, and by 1995, * * * issued 173.83 billion yuan of corporate bonds. At the end of 1995, the stock market value (A shares) was about 45 billion, of which only one third were listed and circulated as individual shares. Most of the state-owned shares are converted by the past investment and land value, and the actual cash investment is not much. The issuance of legal person shares and individual shares can enable enterprises to raise cash, but too few enterprises can be approved to issue shares. In this way, the funds that enterprises can raise by issuing stocks are very limited, and most enterprises can only rely on bank loans.

in addition to the main financial assets, there are other financial assets, such as private lending, private fund-raising and shares in the joint-stock cooperative system. These financial assets all have the right of ownership, participation and disposal in a certain sense, and get benefits from them. However, at present, private lending and private fund-raising need to be further standardized.

The structure of financial assets in China can be summarized as follows: the main body of savings has changed from the government to the common people in the reform and opening up; The proportion of national government revenue in the gross national product decreased year by year, from 31% in 1978 to 1.8% in 1995; Since 1985, the state's investment in state-owned enterprises has changed from appropriation to loan, and the capital market channels for direct financing are narrow; Other real estate markets have just started. This makes the people deposit most of their savings in banks, and banks lend most of their funds to state-owned enterprises, which has become the main source of long-term investment (fixed capital) and liquidity of state-owned enterprises, resulting in the rising asset-liability ratio of state-owned enterprises.

second, why does the ratio of broad money to gross national product in China increase rapidly?

there are two main lines in the changing process of financial assets in China, one is the monetization process, and the other is the development of money market and capital market. Here we mainly analyze the monetization process. Monetization has two meanings: first, the monetization of fiscal deficit, that is, the state makes up the fiscal deficit by printing money. The second is the monetization in the process of economic development, that is, in the process of economic development, especially in the process of reform and transition, there is an extraordinary demand for money, which slows down the circulation of money. The monetization of this paper refers to the latter sense.

from p>1978 to 1995, the gross national product of China increased by 9.7% annually, the inflation rate was 7.5% and the broad money (M2) increased by 25% annually. The growth rate of broad money in such a long period far exceeds the sum of GDP growth rate and inflation rate, which is rare in the economic development history of various countries. According to the author's conservative estimation, from 1978 to 1992, the central government's annual coinage income accounted for about 3% of the gross national product on average. Xie Ping (1994) estimated that from 1986 to 1993, the central government received an average of 5.4% of the gross national product. Overseas economists often don't understand why the China government's actual comprehensive deficit is so high (about 8-9% of GNP), but the inflation rate is not very high. One of the important reasons is the coinage income brought by monetization.

table 2 gives the main indicators of the monetization process in China. The ratio of broad money (M2) to gross national product (GNP) in China showed a rapid upward trend during the reform period. It rose from 32% in 1978 to 15% in 1995, which is rare in the case of financial deepening in developing countries. In 1994-1995, the ratio of broad money to GNP was 59% in the United States, 14% in Britain, 114% in Japan, 7% in Germany, 46% in Indonesia, 44% in South Korea, 89% in Malaysia, 5% in the Philippines, 89% in Singapore and 79% in Thailand (International Monetary Fund, 1996 Annual Report) This proportion of China far exceeds that of neighboring developing countries, and it is quite high even compared with developed countries such as Britain, the United States, Japan and Germany, second only to Japan.

The rapid increase of the ratio of broad money to gross national product in China is inevitable in the financial deepening in the reform, and it also reflects the problem of financial asset structure in China. In the reform and opening up, the main body of savings in China has changed from the state to the common people, and the income distribution has tilted towards the residents. However, there are not many choices for ordinary people to invest in financial assets, and bank savings have always been the main channel. This is mainly caused by the lagging development of China's capital market. The high ratio of broad money to gross national product in China is not a natural choice of economic subjects, but a necessity under the constraints of existing systems and policies. The ratio of money to broad money (M1/M2) in Table 2 proves this point from another aspect. The proportion of money in broad money dropped from 82% in 1978 to 39% in 1995. In other words, not only the broad money grows rapidly, but also the structure has changed greatly. The increasing proportion of residents' savings in broad money reflects that most of the financial assets held by residents are on bank deposits. In 1995, the net cash input was 6 billion yuan, and the cash in circulation in the whole society only increased by 8.3% over the previous year; M1 increased by 16.8%; M2 increased by 29.5%, 4.5 percentage points higher than the control target of 25%.

China's capital market is lagging behind, which can also be seen from the comparison of financial asset structures in various countries. Table 3 gives a comparison of China's financial asset structure with neighboring countries and some developed countries. In 1993, China's stock market value accounted for 9% of GDP, and the bond market value accounted for 11% of GDP. In neighboring countries, the average market value of stocks accounts for 148% of GDP, and the average market value of bonds accounts for 3% of GDP. The stock market value of four developed countries, Britain, America, Germany and Japan, accounts for 75% of GDP on average, and the bond market value accounts for 74% of GDP. The development of China's capital market not only lags behind developed countries, but also lags far behind neighboring developing countries.

Third, the consequences of abnormal financial asset structure in China

1. The corporate debt ratio is high. According to the figures of the State-owned Assets Administration Bureau, the asset-liability ratio of state-owned industrial enterprises was only 18.7% in 198. From 199 to 1993, they were 58.4%, 6.5%, 61.5% and 71.7% respectively. When the assets of 124, state-owned enterprises were verified in 1994, the asset-liability ratio of state-owned enterprises had risen to 75.1%, and if the actual losses were deducted, the asset-liability ratio of state-owned enterprises was as high as 83.3% (Wu Xiaoling, 1995).

2. The risk of financial operation is high. First of all, the turnover rate of bank credit funds slowed down, and the annual turnover rate of national bank loans dropped from 1.32 in 1993 to 1.15 in 1995, that is, once every 313 days. Second, state-owned enterprises are in serious arrears with each other, and the unpaid interest receivable by state banks reached more than 22 billion yuan in 1995, an increase of nearly 1 billion yuan over the previous year. Third, the quality of credit assets of state-owned banks has gradually declined. At the end of 1995, non-performing loans accounted for 22.3% of all loans. If the balance of loans of state banks at the end of 1995 was 4 trillion yuan, there were about 9 billion yuan of non-performing loans. Fourth, state-owned banks have difficulties in operating. In 1992, the profits of China, agriculture, industry and construction companies were 34.3 billion yuan, which was reduced to 16.6 billion yuan in 1994. In the first half of 1995, there were industry-wide losses except China Bank.

3. The debt burden of state-owned enterprises is heavy. In the first quarter of 1996, the national state-owned industrial enterprises experienced a net loss while the overall economy developed steadily, with a total loss of 3.41 billion yuan. The proportion of loss-making enterprises rose from 4.8% in the same period in 1995 to 44.9%, and among large and medium-sized state-owned enterprises, the proportion rose from 45.1% in 1995 to 51.4% (Shi Gang, 1996). The situation improved slightly in the second and third quarters of 1996, but the overall economic benefit is still not optimistic. One of the important reasons for the loss of state-owned enterprises is the heavy debt burden, and many state-owned enterprises are short of capital. Especially after the implementation of appropriation to loan in 1985, some state-owned enterprises rely entirely on bank loans for their investment in fixed assets and liquidity. All the hard-earned money of state-owned enterprises has been repaid to the banks.

Further reading: How to buy insurance, which is better, and teach you how to avoid these "pits" of insurance.