Risk forced the new opportunities

Polaris solar PV net news: for more than 30 years reform and opening up, China’s financial system under the planned economy system “unification” to the current stage, market maturity, financial market structure evolves, but the financial risks are accumulating in the process, and the Socialist market economic system in our country is still in transition under the background of, showing some of the complexities and particularities. Mutual transmission of economic and financial risks, as well as new and old risks intertwined influence seriously challenge for China’s economy at the same time, also with “forced” has led to new opportunities.

The complexity and specificity of financial risk

First, the reform coordination issues in the transformation of the financial system itself may face greater risks. Since China’s economic reform has been “touching the stones,” walking in the River to “deep end”, change to reforming what kind of rhythm, have a critical impact on the development of China’s market economy. As regards the financial markets, more radical reforms or reforms stalled, may lead to greater financial risk.

Second, the problems of operation of financial institutions is also formed special causes of financial risks in transition. Current China financial system to Bank led of indirect financing mainly, non-bank financial institutions and the business development time relative more short, normative problem quite degree to exists Yu financial institutions of daily operating activities in the, highlight surface now various financial institutions of violations operating problem Shang, as part commercial banks missing necessary procedures of violations loan, and policy sex Bank funds failed to real achieved closed run, and TIC across range operating, and misappropriated customer funds,.

Third, the lagging pace of financial supervision in transition may lead to greater financial risk. From the perspective of history of world finance, effective regulation is undoubtedly the controlling financial risks, improve financial efficiency and an important guarantee for safeguarding financial security. The particularity of the transformation of China’s financial supervision has a more complex problem. With the development of global economic and financial integration and the deepening of China’s reform and opening up, the financial industry will face greater impacts and challenges, financial supervision tasks more difficult, and will be further increased the difficulty of maintaining financial stability.

Various types of financial risk overlap brought about severe challenges

Facing a series of financial risks, development of the financial system itself is not perfect, the monitoring mechanism is not perfect cause, others accumulated since the reform and opening up of the economy risk reflected in the financial sector. So far, real estate, local government debt, excess capacity in areas such as the formation of credit risks of banks and shadow banks risk is financial risk the core issue in the near future, high corporate debt rates, liquidity imbalance issues that need attention.

First, as the economy from rapid growth to a moderate speed shift earlier sustained upside real estate will usher in “turning point” in some cities and areas of exposure to bad real-estate loans are accelerating. Meanwhile, shadow of the real estate industry as represented by the Trust Bank financing has increased dramatically, and this Fund is exposed to higher risk levels. 2013 real estate trust balance has exceeded 1 trillion yuan, new real estate trust 684.8 billion yuan, an increase of 116%.

Second, from China economic development level, and Government sex debt of status and assets and liabilities of mutual relationship see, China Government sex debt risk General can controlled, short-term within outbreak full debt crisis of possibilities smaller, but part economic development level weaker, and industry structure single, and pillar industry exists obviously capacity excess, and financing capacity weaker of area claims debt pressure larger, exists outbreak debt crisis of May.

Thirdly, according to the National Bureau of investigation, national steel, coke, cement, electrolytic aluminum, ship, photovoltaic, construction machinery industry capacity utilization only up to 75%, these loans have become bad loans in the field of “disastrous”. With the “excess capacity” promotion of some enterprises to the funding problems of overcapacity in the industry turned to getting funds from the shadow banking system, which to some extent increased the potential risks to the financial system.

Worth noting is that excess liquidity and structural imbalance became focused on major problems in financial operation. From 2008 to 2012, the Chinese money supply surged by 50 trillion yuan, almost double. But because of the serious mismatch of financial resources, a lot of idling in the excess money in the financial system, there is no effective capital to boost the real economy.

Financial risk as the spur of new opportunities

Passing each other on economic and financial risks, as well as new and old risks intertwined under the influence of complexity and specificity of the financial risk in transition to seriously challenge China’s economy at the same time, as a “forcing” approach has brought new opportunities.

Financial risk of real estate “forced” financial institutions adjust their asset allocations to form a more rational capital structure. Current main banking institutions ‘ real estate loans and other real estate-mortgage loans account for the shifts close to 40%, a real estate loan concentration ratio of banking institutions higher. Emerging real estate financial risks, financial institutions began to take the initiative to adjust the real estate lending, improved asset allocation structures. This will definitely help to promote financial institutions to deal with future real estate price fluctuation risk resistance capacity.

Local government debt risks “forcing” separation, gives the market more fair and more free gaming the rules. Restrictions in order to circumvent the system of issuing bonds, local governments often rely on more subtle ways of borrowing, in this context the Government sector and the financing, complex relationships among financial institutions, financial resources, greatly affected the market a decisive role. Local government debt risk exposure, policy level started to clear local government powers and expenditure responsibilities, speed up the adjustment of financial institutions doing business with government financing platforms, will help standardize the order of financial markets, shaping a fair and free market rules of the game.

Financial risks of overcapacity “forced” financial institutions adjust credit policies, accelerating the pace of industrial restructuring. By the end of 2013, China’s iron and steel, cement, plate glass, non-ferrous metal smelting, ship five industries with surplus production capacity totaled 1.65 trillion yuan of loans in 2013, representing a decrease at the beginning of 55.543 billion yuan, a drop of 3.26%. This portion of the funds exiting the current capacity is clearly insufficient for industries such as high tech, new energy finance has created favorable conditions.

Shadow banking financial risk “forced” reform of financial regulation, effective safeguards for financial stability. Shadow banking system based on modern information technologies, through financial innovation objectively improves financial efficiency, plays similar to the term-transformation of commercial banks, liquidity, credit transfer as these basic functions, to a certain extent, satisfy the pressing investment and financing needs of the real economy. Therefore, shadow banking financial risk does not mean that we need to close the shadow banking, but for further regulating the shadow banking and shadow banking as an important complement to traditional financial institutions to play a role to create an important opportunity.

The structural risks of liquidity mismatch “forced” money flow enterprises, promotion of financial services to the real economy. Last June, a special pattern, ostensibly a periodic shortage of funds of financial institutions, the Central Bank’s monetary policy outcome of the larger shift in thinking is actually insufficient inventory for stock funds, liquidity mismatches, currency “idling” were responsible. In order to avoid falling into a similar risk, has begun this year to speed up financial institutions adjust their allocations, take measures to revitalize the stock funds, a move that is conducive to further implement financial services to the real economy, realizing the benign development of enterprises and financial institutions. (The author is a doctor of Economics, worked for ICBC’s Institute of urban finance)

Original title: risk forced the new opportunities

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