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About the current situation of excess liquidity analysis

Author: LiuˇˇTao From: www.yourpaper.net Posted: 2009-06-06 06:21:12 Read:
papers Keywords: CPI trade surplus liquidity excess
Abstract:
excess liquidity has become the focus of the people since a long period when Yan, this is mainly due to excess liquidity in the economic development of this stage constitute obstacles to bring to people's daily life a lot of inconvenience. In this paper, the recent years, the existence of some economic phenomenon leads to excess liquidity, elaborate on the performance of excess liquidity, causes and countermeasures.


excess liquidity performance

The so-called excess liquidity, is the currency of the monetary authorities too much, excessive monetary growth, adequate sources of funds for banking institutions, household savings increased rapidly. Macroeconomic performance more than the GDP growth rate for the money growth rate; purposes of the banking system, exhibited excessive bank excess reserves, has a strong lending capacity.

(a) CP! high
Far from the end of 2007, the most impressive, I believe is the rapid rise of commodity prices, the rate and extent of staggering. Particularly evident in the life class supplies at an unprecedented price and rally in front of us. The continuing rise in prices has become one of the important issues that affect China's economic development and social harmony. Since 2007, global food prices, the prices of cooking oil and petroleum, minerals and other resource commodities prices transmitted to the domestic and the improvement of living standards of domestic residents and excess liquidity, but also led to domestic consumption commodity prices continued to rise. In 2007, CPI rose 4.8% in the full year, to become the highest growth rate since 1996 year. CPI is a lagging indicator, if only the average annual CPI to pull down the seriousness of the CPI is too high, it may actually lead to a policy mistake. , Since March 2007, the consumer price level continues to rise, from August to December, the year-on-year increase for five consecutive months in more than 6%. 2008 is more severe in the first quarter the CPI rose 8%, the second quarter CPI has dropped somewhat, but it reached 7.7%. Consumer prices rose too fast, and has become a prominent contradictions in the current economic life.
National Bureau of Statistics chief economist Yao Jingyuan believes that this round of price increases driven by the food, although it is structured and phased, but the causes are complex, both domestic factors and international factors. Lag 2008 prices in 2007 to run high, a great influence, coupled influenced by international market prices of commodities, the domestic market demand and other factors, the overall price level in 2008 is still greater pressure to complete to prevent structural price increases from turning into significant inflation is a difficult task.

(b) of the huge trade surplus
According to China's General Administration of Customs released the 2007 China's foreign trade import and export data, China's foreign trade surplus reached a historical high of $ 262.2 billion, an increase of 47.7% compared with $ 177.47 billion in 2006, the highest in the world. China's foreign trade volume exceeded 2 trillion U.S. dollars mark for the first time, reaching $ 2.1738 trillion, an increase of 23.5% over 2006. Which exports of $ 1.218 trillion, an increase of 25.7% over the previous year; imports of $ 955.8 billion, an increase of 20.8% over the previous year. After a series of macro-control policies, as well as some other factors, in 2008 the first seven months of trade surplus accumulated to $ 123.72 billion, a decrease of 9.6% compared to the same period last year, a net decrease of $ 13.1 billion. As of the end of July, China's foreign trade import and export value reached 1.48211 trillion U.S. dollars, an increase of 26.4% over the same period last year. Which exports $ 802.91 billion, an increase of 22.6%; imports of $ 679.2 billion, an increase of 31.1%. Since the beginning of the 21st century, China's macroeconomic last few years to maintain a rapid growth rate of over 10%, rapid growth, macroeconomic structural imbalance significantly exposed, this imbalance is mainly manifested in the proportion of investment-led economic too large, domestic consumption growth fast, but the pulling the proportion of consumption to economic growth is relatively small; in this pattern, there are too much dependence on exports, while the increase in the slowdown in the U.S. economy and international trade friction the case, the excessive dependence on exports will make our economy there is a certain risk. Meanwhile, the over-reliance on export trade, the excessive growth of the international trade surplus, has become the main source of excess monetary liquidity. At present, the trade surplus is still excessive foreign exchange, exacerbated by excess liquidity, investment in turn will support the expansion of industrialization, especially the rapid growth of heavy industry, an important reason for The surplus is too large due to the imbalance of international payments, became a prominent contradictions in the economic development. Extensive growth mode of foreign trade, international trade friction increasing pressure problems have become increasingly prominent.
From these phenomena reflect the abnormal financial phenomenon exists in the current Chinese economy, the masses rising incomes and declining consumption rate; RMB international purchasing power, domestic purchasing power is on the decline. The reason for these abnormal financial phenomenon of excess liquidity.

Second, the causes of excess liquidity

The current excess liquidity in the surface to see the funding problems, actually it is a comprehensive reflection of the many contradictions and problems in the economic operation, it is enough reasonable internal and external variety of policy, institutional, and improve internal and external economic imbalances common.

(a) the introduction and utilization of foreign investment policy is reasonable.
The excess liquidity in domestic and foreign demand relationship imbalance intensifies, the high imbalance in the international balance of payments surplus type results, which failed to timely adjust the policy with the introduction and utilization of foreign investment in China is closely related to. China's open economy has entered a transition, but the practice still exists unconditionally to encourage foreign investors to shed, has not been properly controlled. In the current economic management system in order to pursue the goals of high economic growth, the government still maintains important economic resource configuration powers under the pressure of the economic growth indicators, it is easy to draw on the resources of the hands to expand investment crowding consumer, thus exacerbated the overall supply and demand, the structure of supply and demand and the increasingly acute contradictions between production and consumption. So the government out of the political achievements, enterprises out of survival, must do everything possible to expand exports, investment, government at all levels even with the introduction of local preferential policies to attract foreign investment, provide tax relief, cheap land, and ultra-low-cost labor, and even a large number of high energy consumption, high pollution and consume a lot of the shortage of resources, foreign-funded enterprises to successfully enter China, foreign investment grew huge "external diseconomies". At the same time, the pilot project of the Qualified Foreign Institutional Investor (QFII) and Qualified Domestic Institutional Investor (QDII) system are not synchronized, the more exacerbated the imbalance of capital flows, thus exacerbating the pressure of excess liquidity.

(b) of deposit and loan interest rates are too low and the difference is too large to savings and loan
Academic circles at home and abroad generally considered a high savings rate led to the consumption rate is too low, the central bank under government control, has maintained low interest rates to ease the financial policy. Under the low interest rate policy, the economy, everywhere is full of cheap funds, all funds are looking for a way out, excess liquidity is a lot of capital in the financial markets as well as real estate and other physical assets on the market, seeking to invest in profitable space , promoting asset prices. In fact, the low interest rate policy in the current population structure, not domestic residents savings decline, on the contrary, but at the same time causing the high liquidity of the domestic banking system. The low interest rate policy under the control quickly transferred to the real estate and other capital-intensive industries, rapid reduction of the residents of wealth, spending power is declining, so that the entire financial system of excess liquidity to further enhance the social wealth. Capital scarcity has been a major obstacle to economic development in developing countries through market competition mechanism to determine the capital level of interest rates, effective investment needed funds, investment competition eliminated invalid, such a scarcity of capital efficiency can be reflected. If you do not change China's low interest rate policy, it does not play the role of the price mechanism in the financial markets, macro-control in order to achieve the desired goal is very difficult.

(c) foreign exchange reserves management system single
in recent years, the direct cause of the excess liquidity is the excessive growth of foreign exchange. Continued huge trade surplus due to more than a decade, the level of foreign direct investment is rising, coupled with the expected appreciation of the role of the foreign currency forward spreads, short-term influx of international speculative capital, the central bank's foreign exchange reserves along with continued rapid growth. From $ 51.6 billion in 1994 to $ 1.0663 trillion in late 2006, and the end of 2007 reached $ 1.528 trillion, an increase of 43.3% over the previous year, continues to dominate the world's first. Such a huge amount of foreign exchange reserves will bring all sorts of negative impact on China's economic operation. The most prominent is the foreign exchange foreign exchange reserves continued to rise due to change of base money, money supply endogeneity bring great pressure to the central bank's monetary policy control, causing between monetary policy and exchange rate policy the conflict, and thus indirectly affect macroeconomic stability. In the formation of foreign exchange reserves while in the case of continued growth in a variety of ways to the influx of foreign exchange, the central bank was forced to put the equivalent of the base currency, and therefore it has injected huge amounts of liquidity to the banking system. China's foreign exchange management policy is not perfect, the overall capital inflows, while the outflow is more difficult. Mandatory foreign exchange settlement system, so that the public can not be any holders of foreign exchange, resulting in performance for foreign exchange in the interbank foreign exchange market continued oversupply. At the same time lag due to the adjustment of exchange rate policy, exchange rate variations limit is too strict, the RMB exchange rate formation mechanism of the lack of flexibility, and difficult true reflection of the level of foreign exchange supply and demand, formed by supply and demand, prices and the actual departure from the exchange rate on the foreign exchange supply and demand can not effectively play regulation, thus exacerbating the excess liquidity.
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