A Study Of The Structural Effects Of China's Expanding Monetary Policy Under The Condition Of Credit Ration

Monetary policy belongs to the general policy. It regulates the operation of macroeconomy through changing money supply and the interest rates. But in recent years, a great proportion of loan from the expansionary monetary policy has flew into the large-scale enterprises and the state-owned enterprises with excess liquidity, the funds also flow into the assert market which is represented by the stock market and real estate market, while the small and medium-sized enterprises facing with difficulties in financing. In this background, the effects of China's monetary policy present the characteristics of structural differences, the effects of expansionary monetary policy on the real economy and the stock market lead to different scenarios, as the same on the enterprises with different degrees of financing constraints. Especially since 2015, effected by the depressed external demand and the transformation and updating of economic structure, the economic growth continues to decline, the central bank has cut its benchmark the interest rate and deposit reserve rate successively, aiming at boosting aggregate demand through expansionary monetary policy, but it turns out to be difficult to change the downward trend economic growth, while during the same time, the stock market has experienced a great fluctuation.This dissertation argues that the credit rationing in China's relatively underdeveloped financial market is an important cause of the structural difference of expansionary monetary policy'effects. For a long time, the reform of China's financial market lags far behind the reform of economic system. The bank-based financial system is characterized with the severe credit rationing which leads to financing constraints faced by the enterprises and individuals, and the problem has not been solved for quite a long time. The existence of interest rate control and credit scale control in China has obviously inhibited the transmission of monetary policy transmission. The credit rationing has caused credit funds generated from the expansionary monetary policy cannot be used effectively. Most funds flow into the enterprises with low degree of financing constraints, these enterprises tend to have comparatively lower investment demand and investment efficiency, which led to a decline in the impact of expansionary monetary policy. At the same time, the asset market is also an important place which absorbs the credit funds. The funds flow directly into the asset market and then push the assets'prices up, leading increasingly more funds to trade in the asset market, thus have reduced the effects of monetary policy on real economy.By using the micro economic data, this dissertation tries to analyze the above theories. Chapter 4 and chapter 5 have found that the financing constraints caused by the credit rationing is widespread in China's enterprises through the Panel Threshold Model. This problem has severally affected the effects of expansionary monetary policy. The changing of credit scale caused by monetary policy put structural different effects on the enterprises with different degrees of financing constraints. To be specific, the expansionary monetary policy has a significant impact on the enterprises with low degrees of financing constraints, credit expansion has significantly increased their output and profits compared to the enterprises with high degrees of financing constraints. In addition, this dissertation also finds the credit expansion can cause the production efficiency of enterprises with low degrees of financing constraints to decline and the one with high degrees of financing constraints to rise at the same time. It illustrates the existence of credit rationing indeed has caused low efficiency use of credit funds.Furthermore, this dissertation also verifies the effects of expansionary monetary on the stock market. With the development of securities margin trading and other financial business, a great proportion of the credit funds generated from the expansionary monetary policy flow into the stock market. Chapter 6 adopts the method of quasi natural experiment, by using the stocks'trading data and financial data of listed companies, has found that, after the bull market began in July 2014, the expansion of credit funds has pushed up the stock market's prices continuously to rise. The expansion of margin trading is the important reason for the price of the stock being overvalued, thus confirms the fact that the expansionary monetary plays a role in pushing assets'prices rise.