Guard Against Financial Risks Of State-owned Enterprise Debt Theory And Countermeasures

In 1999, when I was writing some parts of "The Relevance between Treasury Bonds and Financial Risk", which is included in "The Research on the Fiscal & Tax Theory and Policy Against Financial Risk", I found that creation of financial risk is closely related to funding model of a country. In a country with high indebted funding model, the possibility of development and eruption of financial risk is greater; on the contrary, it is by far less possible in a low indebted country. It is the funding models of a government and capital structures of enterprises that mainly determine the national funding model. When government debt (bond-issuing and loan from foreign governments and banks) takes up a high proportion in fiscal revenue, with the same condition in corporate capital structure, it is called high-indebted funding model; otherwise, it is low-indebted funding model. In the former, the financial risk is generated by transference to the financial system from various bubbles resulting from investment, management, speculations in stock markets & real estates, and excessively high interest rate. Then, such financial risk will either release through chronic inflation or vanish in financial storms, ending up in rapid currency devaluation. In the low indebted model, however, due to the increase of manpower income and capital socialization, capital socialization will cause residents to adjust themselves in the aspects of consumption and accumulation, which can avoid overproduction; on the other hand, the risk of investment and management will socialize and scatter with the development of investment fund and stock. At the same time, the lost asset will vanish with the loss of securities value, and will no longer exist as fictitious value in banking or form inflationary pressure from bad asset. Moreover, there is no chance of financial risk centralizing in banking. Therefore, the potential risk of financial system in a country forges close link with its funding model, and usually, there stands a higher risk in financial system when both its government and corporation adopt a high indebted funding model. Naturally, this set me such questions: what mechanism controls the transference between corporation debt and financial risk? And what characteristics does it possess in China?In the "Financial Risk and Capital Socialization", written by Dr. Zhou Tianyong, some opinions gave me a new look on this issue. Whether financial system operates stably or not is not only closely related to corporate funding channels, but also has high link with corporate funding systems, efficiency and asset structure. During the course of market-orienated reform in socialist country, public finance is turning from "productive and constructive finance" into "food by debt" finance. With the increase of average per capital income, the deposit propendency becomes higher and higher, and the scale expense at the same speed. Because of sluggishness in direct funding channel and capital market, the high proposition of government capital, in another word, sole proprietorship, the whole state-owned economy has to finance from banking, which was resulted in higher indebt proportion of state-owned enterprises(SOEs). Furthermore, because efficiency of investment and enterprise is lower than interest rate of bank, such inversion makes it possible that the national investment project and SOEs shift its loss on to state-owned bank monetary system completely or partially, which leads to inflationary pressure from bad assets, and greater financial risk in banking. Thus, low efficiency of SOEs inevitably leads to hyper-inflation pressure and collapse of bank monetary system. Such understanding above is so important that it runs through the whole thesis. Starting with the analysis of corporate funding mechanism, the dissertation puts forward high-liability-funding model as hypothetical condition when analyzing the relevance between corporate liabilities and financial risk. In a national economic system, there is a circular process among "revenu deposit...