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The use of the thinking about the national debt

Author: LiWeiLin From: www.yourpaper.net Posted: 2007-11-19 02:43:36 Read:
Since Goldsmith (1969) and Levine (1993), the empirical evidence on the impact of the financial development of the development of the real economy is very solid, it has formed a consensus: a better financial market savings income it can be more effective in saving configuration to the field of investment, and is likely to increase savings. Let us recall history:
The end of the 17th century, the founding of the Bank of England triggered the financial revolution in the United Kingdom, British government bonds to facilitate capital from productive capital to the financial infrastructure transformation, so that private investment fund the development of the financial instruments, the stock market and the government bond market generated a positive externality. The establishment of the Bank of England showed that the government's reputation improved, the increase in government borrowing may have a positive impact on financial infrastructure construction. (Gilles ? Sao Paulo, 1995)
In view of the financial system for the economic development of a strong role in promoting and successful experience in the UK, we have to take advantage of China's government bond thinking.

One applicable conditions

(A), the national debt

China is in a period of institutional transition, due to the strong intervention of the government of the capital allocation process, public investment crowds out private investment phenomenon exists, investment in government bonds require payment of bank credit and securities markets, commercial banks and investment banks join hands with the government in financing In case of limited funds, commercial banks and securities markets is bound to compression other business or personal investment demand. In the real economy, some infrastructure sectors, such as communications, posts and telecommunications, transportation, etc., there are serious administrative monopoly, government departments and their subordinates through administrative means to restrict the entry of other investment entities, undermined the enthusiasm of private investors weakened the possibility of expansion of private investment in related industries. These industries are dominated by state-owned enterprises, however, China has not yet established a bankruptcy mechanism for state-owned enterprises, resulting in a scarcity of funds, adding to the financial burden, in this situation the efficiency of the use of treasury funds is very low, only to protect the state-owned enterprises would not fall, and also increase the cost of investment in other enterprises; relatively small market space, limiting the development of private enterprises. Therefore, China's massive national debt will inevitably lead to a "crowding out" of the institutional, resulting in decreased micro-economic viability, especially as the development of the private economy to promote the main force of China's economic growth may limit. Nearest bank capital injection, and then again to increase the national government stealth guarantees to prevent the development of non-governmental enterprises and financial organizations of, contrary to the possession of wealth to the people the truth, but our government is a strong government, national debt fund-raising is a relatively quick and inversion of . Economic development, lack of power, mainly the slow development of private enterprise, From the above analysis, the entire chain is broken in the financing aspects of private enterprises. Learn from the British experience through treasury bonds funds to promote the transition from productive capital to the financial infrastructure, the development of financial instruments such private investment fund, the stock market and the government bond market to generate positive externalities.

(B) investment

From the most recent years, the increasing share of consumption, investment, exports Troika investment accounts, business expansion focus on quantitative expansion, ignoring the qualitative expansion, extensive economic rise, the economy a little overheated. Because our labor cheap, the lack of funds to meet the increase in labor necessary to the introduction of foreign advanced technology and production lines, focusing on the qualitative improvement, the demand for capital gap, but a large amount of savings deposits in China alarming both The contradiction between can be seen not real scarcity of funds, but the savings - investment conversion mechanism inefficient. The presence of a large number of state-owned enterprises, coupled with the Government's stealth guarantees, these companies continue to produce, a large backlog of inventory, the asymmetric common cause of the drop in demand and rising investment demand and supply of products in the community. Due to institutional reasons, the capital allocation function disorder, but to make the increase in non-performing assets of commercial banks, the scarcity of financial resources, local governments because of the sake of the image of the project vigorously redundant construction, fishing achievements, forcing banks to funds allocated to those who seem scarce regions, The country's overall surplus production enterprises, resulting in the total supply exceeds total demand caused by the overheating of the economy. China's economy is in the ultra-high-speed development period, more large-scale investment projects, issuance of treasury bonds has accumulated a lot of money, in order to avoid the country appear above allocation of the funds, should learn from the German financing for large-scale investment projects in Germany to set up a credit bank, these banks in addition to prefer to go through normal banking holds a large number of industrial stocks, and to enter the investment banking business, exclude smaller companies slow the accumulation of capital, this credit banks can take advantage of such a good time, the use of bond funds from productive capital to transfer of financial infrastructure, reduce the overheating of the economy, cooperation in the formation of the private financial system by the government and private capitalists, state-controlled, diversified financing channel to promote private enterprise, to cultivate private financial system, and the final integration towards Mixed by professional management, improve the quality of economic development.

(C), the stock market

The most intractable problems in China's stock market is due to the dominance of state-owned shares, does not circulate. When the stock market fell, the government played a primary responsibility for the "bailout" government funds for the tray, a small number of interest groups and individuals in the hands of capital inflows result in disguise, the pure of government bonds to compensate. Because the flow of the stock market value is small, easy manipulation by institutions operator, so often appear in the Chinese stock market, "the agency first by bad purchase, then overdraft speculation, last by favorable shipping" phenomenon caused by the stock market fluctuations, according to China's stock market Game analysis of institutional and individual investors, institutions in the proportion of investors and the market as a whole to be manipulated degree of relationship can be inverted "U"-shaped curve, said that institutional investors in the share ratio is already high enough, due to the institutions substantial increase in the volume of transactions in the inter-agency occupy a larger proportion of the total market turnover, any attempt to manipulate the stock agency and other agencies game, due to the approaching of the expectations of the other agencies, institutions, manipulation excess returns of the stock may be brought gradually approaches zero (Zhao Tao, 2002). Stock manipulation to a significant reduction in the overall market manipulation was not too badly. Our country the last two years to the extraordinary development of many institutions, but the proportion of the general bodies investors is still low, so you want to learn from the experience of reform in Eastern Europe, in the premise to promote the privatization of the commodity markets and establishing market economy the financial markets, privatization is conducive to the development of the privatization investment funds and other intermediaries, privatization investment funds and a strong response to the privatization, promote further reform. China's commercial banks, savings deposits to banks caused huge interest pressure, although the short-term interest rates and the level of inflation offset has been turned into a negative interest rate, the amount of savings deposits or down, mainly depositors of alternative investment vehicles less As a result, and concerns about the uncertainty of the future, the demand for private financial multiply, the funds mobilized Sunray. In such circumstances, the funds raised from issuing treasury bonds and privatization investment funds, investing in the stock market not only solves the problem of the stock market rises and falls and manipulation, and also created a channel for financing private enterprises in the stock market. Avoid the stock market became a state-owned enterprise "misappropriating" machine.

(D), the "Three Rural Issues"
Since the National Congress, rural areas and farmers, agricultural issues have become the most important issue of the government, since 1949, China established a priority to the development of industrial development strategy, the implementation of agricultural subsidies artificially depress the prices of agricultural products, industrial, so that the income of the farmers severely affected by loss. Implementation of the household contract responsibility system since the reform and opening up, the first liberation agriculture, due to a planned economy to a market economy, the price of farm goods based on theoretical prices, the country in order to avoid inflation, national infrastructure need a large number of The funds, to increase the international competitiveness of the product, the use of a low-cost approach, the price of agricultural products once again repressed. Neglect of the countries on agricultural issues, the "three rural" issue is becoming more serious, In this process, the existing rural financial system together the remaining funds in rural areas move to cities, and support for infrastructure and industrial system building, to borrow the rural financial the poly-owned money-making in the name of. Agriculture building does not have enough money to develop. The countries see various tax relief, but the large number of Chinese farmers, tax relief allocated to each farmer head is very small, more relief funds of the state finance get it out. To conform to the law of economic development, social reallocation of funds, so called for the establishment of channels for the distribution of funds, the rural financial system and the private financial system must be rebuilt. Issuing treasury bonds to raise funds, only the first to support the development of the rural financial system and private financial body, and can not be directly used for agriculture construction, is that the fundamental problem is that the unfair distribution of funds, funds of direct agricultural built in the rural financial system and private financial bodies did not set up previously, still can be transferred to the city through various channels. So, treasury bonds to raise should support the development of the the endogenous rural financial system and civil financial body.
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