Text/Chairman and President of China Chengxin International Credit Rating Co., Ltd., and co-deputy director of the Economic Research Institute of Renmin University of China Yan Yan, Vice President of the Research Institute of China Chengxin International Credit Rating Co., Ltd. Yuan Haixia_ strong2strong, Assistant Director of the Research Institute of China Chengxin International Credit Rating Co., Ltd. Wang Yuanhui
2020 Covid-19 Under the impact of the epidemic, a series of broad fiscal, credit, and currency stable growth policies have played an important role , But it also quickly pushed up my country's macro leverage ratio. With the economic recovery after the epidemic, macro policies seek to restore the balance between the economy and prevent risks, and the macro leverage ratio may slow down.
Combining the macro leverage ratio data, this article deduced in detail the three possible paths and focus points of my country's government departments to reduce leverage after the epidemic, and made a simple estimate of the reasonable path and the reasonable space for reducing leverage.
Post-epidemic government leverage evolution trend: shift from rapid leverage to stable leverage reduction
In 2020, there will be "three arrows" in proactive fiscal (increasing the deficit ratio of , increasing local bonds, issuing special anti-epidemic Under the influence of policy tools such as national debt), my country’s government departments have increased leverage. Local governments are the main body of this round of government departments to increase leverage. Both explicit debts and implicit debts with urban investment as the main carrier have increased significantly. Consider local governments. The leverage ratio of the general government sector after implicit debt has increased significantly by 12 percentage points from 2019.
With the gradual restoration of the current economy, the withdrawal of large-scale fiscal policy tools, and the tightening of the marginal credit policy, government departments will gradually shift from rapid leverage in 2020 to a steady reduction in leverage.
Government departments are rapidly increasing leverage under the impact of the epidemic
In 2020,Under the impact of the new crown pneumonia epidemic, China’s economic and fiscal operations experienced an unprecedented decline in the first quarter. In order to hedge the negative impact of the epidemic, China has adopted a series of measures to stabilize growth: proactive fiscal policies have been more proactive, and the " "The deficit rate increased to 3.6% or more", "the amount of new local special debt increased to 375 million yuan", "issuance of trillions of special treasury bonds", "increase tax cuts and fee reductions," and a series of fiscal combinations; monetary policy adheres to sound and flexible, The volume and price are loose. The three RRR cuts in the first half of the year have released a total of about 1.75 trillion yuan in long-term funds. The reverse repurchase rate, medium-term lending facility ( MLF ), targeted medium-term lending facility (TMLF) and other policy interest rates have been lowered, and a general policy has been created. Policy tools such as the Favorable Small and Micro Enterprise Credit Loan Support Program have contributed to wide credit; regulatory policies have helped economic recovery, and the issuance of corporate bonds and corporate bonds has implemented a registration system to increase support for financing for small and medium-sized enterprises. my country officially launched the fourth round of leverage since the financial crisis. The total debt of the non-financial sector for the year exceeded 300 trillion yuan, and the macro leverage ratio also rose sharply by 24 percentage points to 298%.
Among them, in the context of further strengthening of the proactive fiscal policy, the increase in leverage by government departments is more obvious than in the historical cycle. The total government debt of our country consists of central government debt and local government debt. The narrow debt caliber only considers the direct debt mainly based on government bonds, while the broad debt caliber additionally includes government debts such as implicit debt.
Under the influence of the proactive fiscal "three arrows", government sector debt (only central government debt and local government explicit debt) increased by 8.4 trillion yuan, and the narrow government leverage ratio rose by 7.2 percentage points to 45.8 %; If you consider the hidden debt of local governments, according to the estimation of CCX International, the hidden debt will increase by more than 6 trillion yuan in 2020, the general government sector debt will increase by 14.6 trillion yuan, and the general leverage ratio will increase 12 percentage points to 93.4%. In terms of structure, local governments are the main players in pushing up the leverage ratio of the general government sector in this round.
The balance of central government debt has increased by more than 4 trillion yuan due to the expansion of the deficit and the issuance of trillions of anti-epidemic special treasury bonds, driving the leverage ratio of government departments by 3.4 percentage points; the explicit debt of local governments has increased significantly by 4.35 trillion yuan Yuan,Drive the government's leverage ratio by 3.6 percentage points; if the implicit debt of local governments is taken into account, the issuance of chengtou bonds has reached a new high under a series of lenient credit measures, and the growth rate of implicit debt, mainly chengtou's interest-bearing debt, will rise again. 2020 The growth rate of implicit debt increased by nearly 4 percentage points compared with 2019, ending the decline in the growth rate from 2017 to 2019. The general government leverage ratio is estimated or driven by 5.1 percentage points. Local governments have become the main body of government agencies to increase leverage during the anti-epidemic period.
After the epidemic, government departments gradually turned to a steady reduction in leverage
With the economic recovery after the epidemic, macro policies seek to restore the balance between the economy and prevent risks, and the macro leverage ratio may slow down. At the end of last year, the Central Economic Work Conference and the "2021 Government Work Report" both emphasized "handling the relationship between economic recovery and risk prevention" and "maintaining the growth rate of money supply and the scale of social financing to basically match the nominal economic growth rate. Keep the macro leverage ratio basically stable.” Under this policy tone, the rapid accumulation of debt risks in 2021 will be significantly curbed, and the macro leverage ratio may show a high trend and slow down.
If the growth rate of gross domestic product (Gross Domestic Product, GDP ) in 2021 is 10%, and the year-on-year growth rate of social financing is 11%, the total debt of the non-financial sector may be around 337 trillion, corresponding to the leverage ratio It will reach 301%, which is only slightly higher than last year's level, and the increase in leverage will slow down significantly.
In the context of the normalization of policies and the transition of the credit cycle, the growth of the leverage ratio of various departments has slowed down. On March 15, 2021, the National Standing Committee proposed that "the leverage ratio of government departments should be reduced." Gradually shift to lower levers. The impact of the epidemic on my country's economy is sudden. The outbreak of the epidemic in the first quarter of 2020 has brought my country's economy into a "shutdown". Under a series of short-term and high-intensity response measures, the leverage ratios of various departments have risen rapidly, and the subsequent epidemic will be brought under control. With the gradual recovery of the economy, the growth of the leverage ratio of various sectors has gradually slowed down.
Combined with the "2021 Government Work Report" and "2021 Central and Local Budget Draft",This year, the space for government agencies to increase leverage has begun to shrink. The balance of national debt is expected to increase by 2.75 trillion yuan, and the newly added amount of local debt is 4.47 trillion yuan, both of which are lower than in 2020. However, after the impact of the epidemic, the fiscal operations of various regions have recovered unevenly. , The contradiction between revenue and expenditure in some regions is still more prominent. When the peak of local debt maturity is approaching, the pressure on local governments to repay debts may further increase, and the regional debt risk differentiation will also increase. Government departments must increase leverage and The slowdown in leverage growth in the middle of last year has gradually shifted to a steady reduction in leverage.
The path and feasibility analysis of government departments’ leverage reduction
According to the currently announced central government debt balance and local government’s new bond quota, the total scale has continued to increase the government sector’s leverage ratio from 2.4 to 2.5 compared to the end of 2020. Percentage points. If it is necessary to achieve the goal of the National Standing Committee on reducing the leverage of government departments, theoretically, the reduction of the leverage ratio can be achieved from the reduction of the numerator and the expansion of the denominator. Therefore, we use the leverage ratio formula (total debt/nominal GDP scale) to analyze the three possible paths for government agencies to reduce leverage and their respective feasibility.
only expand the denominator. Accelerate economic growth, and the scale of nominal GDP will increase substantially in 2021. Feasibility analysis: It may be quite different from the theoretical nominal GDP growth rate, which is difficult to achieve.
On the basis of keeping the numerator, that is, the scale of government debt unchanged, theoretically, the goal of reducing government sector leverage can be achieved by expanding the nominal GDP scale at the denominator. Looking forward to 2021, although there are still some restrictive factors in my country's economic operation, the overall restoration will continue, and considering the impact of the low base, the GDP growth rate this year will be significantly higher than the previous year. According to the plan, 's GDP in 2021 will be _ With the expected target of span10span growth of more than 6%, the acceleration of GDP growth will, to a certain extent, avoid the passive increase in leverage due to the fall in GDP growth in 2020, and provide certain support for macroeconomic stability and leverage reduction.
Specifically, combined with the "2021 Central and Local Budget Draft Report", the deficit this year is 3.570 billion yuan.Considering the 3.2% deficit rate, the theoretical growth rate of nominal GDP will be around 9.8%. However, from the comparison between the budget deficit rate and the actual deficit rate in recent years, the actual deficit rate will deviate to a certain extent according to the annual economic growth. Assuming that there is an error between the actual deficit rate and the budget deficit rate, if economic growth this year is more optimistic and positive, it may further expand the scale of nominal GDP and expand the denominator of the leverage ratio.
According to China Chengxin International’s calculations, if the narrow leverage ratio (excluding the implicit debt of local governments) is to be achieved, the nominal GDP growth rate in 2021 will be close to 16%; if it is necessary to achieve the broad leverage ratio to reduce the implicit debt According to the estimation of the implicit debt growth rate falling slightly to 10%, the nominal GDP growth rate may be close to 13%. In both cases, the deficit rate error is relatively large. In particular, the first case is more inconsistent with the historical law, and is far from the target of real GDP growth of more than 6%. There is a large gap in the positioning of moderate annual inflation. Therefore, it is less feasible to reduce leverage that only depends on accelerating economic growth and expanding the denominator.
only drops the molecule. Focus on reducing the growth rate of local implicit debt, and reduce the total debt of the general government sector in 2021. Feasibility analysis: There is insufficient room for the pressure drop of central debt and local explicit debt, and the focus is on promoting the decline in the growth rate of implicit debt.
Judging from the currently published data, this year's central government debt and local government debt are expected to increase the government leverage ratio by 2.5 percentage points, and the central government will contribute 0.6 and 1.9 percentage points respectively, indicating to a certain extent that local governments are still government departments The main body of the increase in leverage ratio, and after the impact of the epidemic, the financial operations of various regions have recovered unevenly, and the contradiction between revenue and expenditure in some regions is still prominent. When the peak of local debt maturity approaches, the pressure on local governments to repay debt may further increase, and regional debt risks are differentiated. Will also intensify.
Therefore, local governments may become the main entry point for this round of government departments to reduce leverage. With the denominator of the leverage ratio unchanged, we will discuss the possibility of reducing the size of the central government’s debt to achieve a numerator reduction of leverage.
There is little room for reducing central government debt. The central budget deficit this year is 2.75 trillion yuan, and government debt is increased by 2.75 trillion yuan through the use of national debt.However, it can be found from historical laws that the annual net financing of treasury bonds is not completely equal to the size of the central fiscal budget deficit. In 2018 and previous years, the actual net financing of treasury bonds did not reach the newly increased quota, but the difference was small. In addition, the actual growth rate of the national debt balance has been higher than the central budget deficit under the steady growth demand since 2019.
Assuming that the net financing of national bonds this year is still less than the new quota, the difference is expected to be small. Based on the average of 56.2 billion yuan between the two from 2015 to 2018, it can slightly reduce the leverage ratio of government departments by 0.05%. The space is obviously insufficient.
Reducing local government debt: There is little room for reduction of explicit debt, and the growth of local implicit debt is controlled in a variety of ways. If it is necessary to reduce the outstanding balance of local government debt, from the perspective of its composition, there are two possibilities that the actual issuance scale of new local government bonds is less than the upper limit, and the scale of government stocks in non-bond forms will be further reduced.
On the one hand, judging from the issuance of new local government bonds, although new local government bonds have continued to expand significantly in recent years, the actual issuance scale is still slightly below the new limit. Therefore, there may be insufficient issuance of new local government bonds in 2021. Taking advantage of the new quota, but considering that the current local government infrastructure demand is still large, and the stock of special bonds and anti-epidemic special treasury bonds caused by the large-scale expansion in the previous period, there are more projects and the continued demand for funds. The actual issuance of new bonds is substantial It is less likely to be lower than the new annual quota.
On the other hand, since the debt replacement expiration in 2018, the scale of non-bond existing government debt has been relatively small, and the focus of local government debt issuance has gradually shifted to new debt with steady growth. This part of the debt reduction rate It has slowed down sharply. Up to now, there is still a remaining 175.1 billion yuan. Considering that refinancing bonds are given new uses for repaying stock debts at the end of 2020, the scale of subsequent non-bond debts may be further reduced, but the impact on the leverage ratio is small. Therefore, it is not feasible to reduce leverage by further reducing the explicit debt of local governments.
At this stage, the Chinese government is still facing rigid expenditure pressures such as protecting jobs and protecting people’s livelihood, and there is little room for reducing general and recurring expenditures to increase debt repayment budget arrangements. Therefore, the total amount of direct debt of the central and local governments is under pressure. The possibility of a fall is low. The author believes that the current round of government agencies’ leverage reduction will focus on the broader government debt.That is, the hidden debt of the local government.
From the perspective of the composition of hidden debts, urban investment companies rely on government credit to expand their debts during their rapid development, and related debts have accounted for more than 80%, becoming the most important carrier of hidden debts. In recent years, under a series of risk prevention measures, the growth rate of implicit debt has slowed down, but in early 2020, due to the impact of the epidemic, the substantial expansion of urban investment bonds under the wide credit policy has once again pushed up implicit debt.
Since the second half of 2020, the policy has gradually shifted from increased leverage to stable leverage, and the credit cycle has begun to shift. With the marginal tightening of the credit environment, the financing of urban investment enterprises may be subject to certain restrictions. Take urban investment bonds as an example. Under the requirements of the Central Economic Work Conference on “maintaining the growth rate of money supply and the scale of social financing to basically match the growth rate of the nominal economy”, if the growth rate of the stock of social financing in 2021 is reduced to 11%, the scale of the stock of social financing may be Reached 316 trillion yuan. According to the proportion of credit bonds, the stock of credit bonds in 2021 can be estimated 11.5 trillion yuan, net financing is about 1.1 trillion yuan, a sharp drop from 2020’s 1.9 trillion yuan. The overall increase in implicit debt is expected to be limited; at the same time, the current implicit debt stock is large and the policy continues to require Promote the resolution of existing debt and the transformation of urban investment, the growth rate of implicit debt can be further slowed down, and the space is relatively large. Therefore, in the future, government agencies may adopt a structural and gradual approach to reduce leverage, combining with the debt situation of key regions to promote the resolution of hidden local debt in an orderly manner.
Expand denominator + drop numerator. Appropriately increase the scale of nominal GDP and reduce the growth rate of implicit debt. Feasibility analysis: It not only guarantees the pressure drop of the total government debt, but also considers the theoretical error in the calculation of nominal GDP.
The first two methods can play a role in reducing the leverage ratio of government departments to a certain extent. If they can be considered comprehensively, they may achieve the reduction of leverage in government departments more safely. On the one hand, government sector debt, especially implicit debt, can be further resolved and reduced in terms of total debt, molecularly reducing the total amount of government sector debt; on the other hand, if the actual deficit rate this year is compared with the budget deficit rate There is a small error, the nominal GDP scale will be slightly larger than the current theoretical scale.To a certain extent, the denominator of the leverage ratio of government departments has been expanded, which will further reduce the leverage ratio of government departments.
This round of government sector leverage reduction space estimates
Considering that under the impact of the epidemic in 2020, the leverage ratio of government agencies has increased significantly compared with 2019. If the subsequent rapid slowdown may lead to an unexpected outbreak of debt risks, therefore Under the requirement of maintaining the basic stability of the macro leverage ratio, the overall keynote of the government department’s leverage reduction in 2021 will be stability. The target leverage ratio is likely to be slightly lower than that in 2020, and the possibility of substantial contraction is small. The overall performance is stable. The downward trend. Based on the previous analysis of the possible paths for government agencies to reduce leverage, the author believes that the comprehensive approach of “expanding the denominator + reducing the numerator” is more effective in achieving a steady reduction in leverage. Taking into account the calculation errors of nominal GDP, it is also to a certain extent. To avoid the risks caused by excessive pressure reduction of debt on the molecular end. Combining path three, the author estimates the space for government departments to reduce leverage in this round.
Molecular end: the leverage ratio can be reduced by at least 2.5 percentage points
In combination with the previous article, the currently announced central government bond balance limit increase and the new limit of local government bonds have continued to increase on the basis of the leverage ratio in 2020 If we consider the special debt quota for small and medium-sized banks retained in 2020, the leverage ratio will increase by 2.5 percentage points. Therefore, in order to achieve the goal of reducing leverage by government departments, the general government leverage ratio must be reduced by at least 2.5 percentage points. On the basis of maintaining a theoretical growth rate of 9.8% in nominal GDP, the corresponding general government debt is about 104 trillion yuan. Classification:
The total of central government debt and local government explicit debt may be able to reduce the leverage ratio by 0.26 percentage points on the basis of the current 2.5 percentage point increase. Among them, the increase in the central government debt balance may fall by 56.2 billion yuan from the budget, and the leverage ratio can be reduced by 0.05 percentage points. Assuming that the actual amount of national debt issued this year does not reach the upper limit, based on the average value of the increase in the national debt balance in recent years and the central budget deficit, the increase in the national debt balance this year is estimated to be 2.69 trillion yuan, which is lower than the balance limit increase of 56.2 billion yuan.
The explicit debt of local governments may drop by 237.9 billion yuan from the budget.The leverage ratio can be reduced by 0.21 percentage points. If this year’s new local debt limit is still not fully used, based on the average value of unused quotas in recent years, there may still be 62.8 billion yuan unused this year; under the background of continuing to promote the resolution of local debt risks, more regions may raise funds Repayment of existing government debts by means of funds and other means, in response to refinancing bonds or accelerated issuance, government debt in the form of non-government bonds may be reduced to a maximum of 175.1 billion yuan, and a total reduction of 237.875 billion yuan in explicit debt.
The remaining task of reducing leverage may be achieved by further reducing the growth rate of implicit debt of local governments. At least 2.24 percentage points can be reduced in the leverage ratio, which corresponds to a sharp drop to 4.6% from 2020. The pressure drop of the growth rate of implicit debt can be specifically considered from the two aspects of controlling the increase and reducing the stock.
In terms of the control increment, combined with the structure of the urban investment interest-bearing debt increment over the years, it is found that 30%-40% of the interest-bearing debt increment is the net financing amount of the urban investment bond that year, and the rest includes loan and non-standard debt. In the context of the tightening of the credit cycle conversion financing margin this year and the further strengthening of non-standard management and control, the proportion of the net financing of urban investment bonds in the increase of interest debt may increase further. If estimated at 40%, the interest-bearing debt of urban investment will increase this year. The amount may be about 2.750 billion yuan, which will further increase to 2.03 percentage points on the basis of the aforementioned pressure drop of 0.26 percentage points.
The remaining nearly 0.5% can be solved by resolving the hidden debts, and the corresponding hidden debts to be resolved is 524 billion yuan. Since the plans and progress of resolving the hidden debts are difficult to obtain, a simple reference is made to the current issues this year. The scale of refinancing debt used to repay debts is 478.3 billion yuan, and it is most likely to be used to repay non-bond government debt and some hidden debts. Among them, the scale of non-bond government debt repayment is small, and the remaining part is used to repay hidden debts. The possibility of a high and a large scale, the end of the year is likely to be able to meet or exceed the target of the hidden debt stock, which can further reduce the leverage ratio by at least 0.5%.
denominator: continue to reduce the leverage ratio by 0.4 percentage points
According to the gap between the actual deficit rate and the budget deficit rate over the years, the average error is about -0.013%. If this average value is used to estimate the possible 2021 deficit Rate error,The actual deficit rate in 2021 may be 3.19%, corresponding to the nominal GDP scale of 112.02 trillion yuan, and the corresponding nominal GDP growth rate will be around 10.3%, which is an increase of 0.5% from the budget deficit of 9.8%, which is the same as the annual real GDP growth rate. The target of 6% is a 4.3% difference, indicating that the level of inflation this year may rise moderately, and the overall risk is still controllable. Finally, combined with the results of lowering the numerator, it is obtained that the leverage ratio of the general government sector further dropped to 93.04%, a slight drop of 0.4 percentage points from 2020, achieving a steady and slight decrease.
In summary, through the "expanding denominator + reducing numerator" approach, the leverage ratio of government departments can be reduced, and the room for reduction is at least 2.9 percentage points. The boundary of further pressure reduction must be combined with the resolution of future hidden debt stocks. Judge and adjust. The current 2.9% reduction in leverage ratio corresponds to an implicit debt growth rate of 4.6%. The general government sector’s total debt is 104 trillion yuan, the nominal GDP growth rate is 10.3%, and the nominal GDP scale is 112 trillion yuan.
Summary
In 2020, in order to cope with the impact of the new crown epidemic, policies have increased the intensity of steady growth, and the Chinese economy has entered the fourth round of leverage since the financial crisis. In the context of increased fiscal policy, the leverage ratio of government departments has increased significantly, and the narrowly defined government leverage ratio has increased by more than 7 percentage points.
With the gradual restoration of the current economy and the conversion of the credit cycle, the macro-leverage ratio will gradually slow down from the rapid increase in the early emergency. The Central Economic Work Conference at the end of 2020 clearly stated that "maintain the growth of money supply and the scale of social financing at the same rate as the nominal economic growth. The general meeting of the State Council on March 15, 2021 emphasized the need to maintain the basic stability of the macro-leverage ratio and proposed that the “government leverage ratio should be reduced”. Combining the above-mentioned policy tone, we It is believed that the leverage ratio of government departments will be stable and fall in 2021, but the possibility of substantial contraction is low.
From the current round of government departments’ de-leveraging methods, as local governments are the main drivers of government leverage ratios, and after the impact of the epidemic, local governments have increased debt repayment pressure and faced regional debt risk differentiation. The core of subsequent government departments’ de-leveraging Or it will be concentrated in local governments, but due to the limited space for further compression of explicit debt,Reduce leverage or focus more on implicit debt. In the future, government agencies may adopt a structural and gradual approach to reduce leverage, combining the debt situation of key regions to promote the resolution of local government debt, especially implicit debt, in an orderly manner. Pressure reduction implies The general government sector leverage ratio of sexual debt.
In addition, if the economic growth this year is more optimistic and positive, after considering the theoretical errors in the calculation of the actual deficit rate and the nominal GDP scale, the government may be able to achieve the goal of reducing leverage more effectively and estimate the leverage of the general government sector. The rate can be reduced by at least 2.9%, but the room for further pressure drop must be combined with a comprehensive analysis of the future stock of hidden debt resolution. At the same time, it must be vigilant that the pressure drop of hidden debt will be forced to increase due to economic growth that is less than expected. Deal with the risk of risk.
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