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20 trillion market value, crash threat to the real economy have how?
source : author : time:2015年7月9日

Since the middle of June this year, the Shanghai composite index has fallen nearly 30%. Small and medium-sized board and gem index is down by nearly 40%. A plunging stock market has made A stock market value evaporated nearly 20 trillion yuan, let many people huge losses. But in the face of the stock market crash, many people are more worried about this is just the prelude to the financial crisis, economic crisis, will bring great impact on China's macro economy.

Obviously, then analyze the stock market shock impact on the macro economy is very necessary. It not only affects our view of the future, also to a large extent determines the relevant policy.

The author based on stock market volatility in the financial system's internal infectious, and the financial risk conduction path to the entity economy, estimated in extreme cases stocks may affect our country economy. Estimation results indicate that the stock market crash though slightly slower economic growth, but the overall negative effect is limited. By the stock market plunged a remote possibility to trigger a financial crisis or economic crisis.

1, the stock market turmoil to the real economy of the conduction path

There are three main stock market turmoil to the real economy conduction path: a direct, two indirect.

Direct influence is easy to estimate. As the financial industry itself is an important component of the macroeconomic. If the stock market crash to financial industry slump, slowing growth, will lower the overall economic growth. The financial industry, 1 quarter of this year, GDP growth is as high as 15.9%, far higher than that of the whole society's 7.0% GDP growth. And the added value of the financial sector accounted for 9.7% of national GDP. The financial industry, therefore, if the stock market shocks growth fell back to an average of 10.2% growth for all of last year, so the whole society about 0.6% GDP growth will slow down (= (15.9 10.2) * 9.7%).

If the 1 quarter of this year 7.0% of the GDP growth by 0.6% in the whole society, it is only 6.4%. This may sound like quite serious, but actually just Numbers game. Slowdown because of the financial sector and just let the other weak industry more reflected in the GDP figures in the whole society, the essence. And even if 0.6% is a big number, it is only a limited number.

Really need to worry about the stock market turmoil spread to the real economy, the entity may also slow down economic growth. In this case, the whole society the loss of GDP growth, it is not a mere 0.6%. This financial entities to infection may through channels "balance sheet" (the balance sheet channel) and "credit channels" (lending channel) two paths.

A balance sheet channel, is lead to hold shares in the stock market slump residents or enterprise wealth, damage to the balance sheet. This triple the consequences may be produced. First, is the stock market wealth brings negative wealth effect of stock lost money - resulting in a decline in home or business spending, so as to hold down the real economy aggregate demand.

Second, due to the balance sheet liabilities tend to be rigid, it is difficult to rapid decline, shrinking stock of wealth can also lead to residents trapped in negative equity or firms. All fall into this situation, if the economy of many subject economy will keep on saving money because a large number of people or companies debts and flat demand, growth slowdown. The Japanese asset price bubble burst in 1990, the housing and stock prices fell sharply, into the "balance-sheet recession" (the balance sheet recession), continuous 20 years slow economic growth.

Third, if the economy is in a lot of the subject shares as collateral to borrow money, then fell will reduce the value of the mortgaged property, and thus affect the financing ability of relevant subject, thus detrimental to their economic activities.

The above three, residents and enterprises from the real economy perspective the infection of path. Fell, on the other hand, the financial institutions will affect its ability to provide financing to the entity economy, so as to form a credit crunch in the real economy, lower economic growth -- this is the so-called credit channels.

In particular, when pressure is spread quickly across the financial system, resulting in a large number of financial institutions are affected, the financial system through the credit channel brings the negative impact of the real economy will be great. The subprime crisis is a good example. After lehman's collapse in 2008, the U.S. financial market panic. Financial institutions in order to protect themselves, are closed to the outside RongChu capital, and try to recover the loan. And U.S. non-financial companies rely heavily on financial markets to provide daily liquidity. In this way, financial market is a problem, the sources of finance of the real economy are dried up, the stagnation of economic activity and thus, sharp decline in economic growth.

To estimate our country the stockmarket turbulence may influence on the whole macro economy, you need to follow the balance sheet and credit channel, the degree of infection anticipation happens. But before that, must be spread on the stock market risk in the financial system for analysis. Because it determines how many financial institutions will be affected, how much of the pressure would be by credit channel transmission to the real economy.

2, the risk of stock market turmoil in the financial system internal transmission mechanism

There is no doubt that the stock market financing of the disc (also known as leveraged funds) is the core of the stock market volatility risk factors. From 2007 to 2007, the Shanghai composite index was down from a peak of 6124 to 1664, the cumulative fell by more than 70%. At that time, people from all walks of life to the risk of stock market is not so worried. This year, the Shanghai composite index but fell by nearly 30%, down from a peak of 5178, the parties will feel a lot of pressure. There will be such a contrast, because the stock market in a large number of financing, and seven or eight years ago.

So-called financing, is to borrow money to buy the stock position. At present, the financing of capital costs are generally in more than 10% annual interest. To pay such a high cost of financing, don't say the stock fell, as long as these investors expect the stock market for a period of time, does not go up will quickly handle the stock sold to repay the finance. In addition, the financing plate with compulsory unwinding mechanism.

That is to say, the financing institutions (such as brokerage) once found fell a lot of shares held by investors, threatening their lend security, will force the investors sold shares to, to back out of their own money. These two points make financing plate market volatility amplifier. It is financing plate, let the stock market fell so quickly.

More serious is that the financing unwind and stock index fell have formed a vicious cycle of reinforce each other, the market is increasingly falling pressure increase. And when everybody is selling, financing disc sometimes can't be done even if want to sell stock positions. So, can only hold a stock financing investors watch fell, until all lost their principal. After that, the financing of financial institutions will inevitably suffer.

In the stock market, the main financing is brokers and Banks. When the market fell to let brokers and Banks are beginning to lose, it is not only the problem of the stock market, and become could threaten the financial system as a whole stable of big trouble.

3, the stock market financing and bank inner capital scale density

To gauge how much financial risk, it is necessary to estimate the financing disk may cost the brokers and Banks. Which need to quantify the size of the capital market financing plate and Banks. The author estimates that in the middle of June before (crash), total market financing of the plate is in 4.5 trillion yuan. 2.5 trillion of them is internal financing, 2.5 trillion is outside financing. And the bank market funds is roughly in 2.5 trillion.

Is the so-called internal financing, brokerage provided to investors' financing. Which subject is "two" (financing in financing, securities). In the middle of June, securities financing balance about 2.2 trillion. In addition, the brokerage also through returns swap provides investors with about 0.3 trillion additional financing. Therefore, the internal financing a total of about 2.5 trillion yuan.

Is so-called over-the-counter financing, bank, trust, civil institutions to provide investors with information and company's financing. This part free from regulation, in the past I rectified savage growth, risk is great. For this part of the scale, we lack of accurate data, and so can only sporadic evidence to calculate. According to data unearthed by the CSRC at the end of June this year, the current over-the-counter formed by hang seng HOMS system total leveraged funds (including principal and financing of the two parts) in 440 billion yuan.

The author estimates, in addition, there are other folk with investment company (such as P2P, Internet financial companies, etc.) to form the lever plates of about 300 billion yuan of funds, and the trust company to institutions (mainly private equity funds) formation of the leveraged funds plate of about 500 billion. Assuming that the average leverage for a few parts of this 1:3, their corresponding financing balance should be at around 1 trillion. Finally, listed companies also by way of equity pledge from brokers and Banks to obtain financing, near its size in 1 trillion. Together, outside financing plate (not including the corresponding principal) to roughly 2 trillion.

Like outside financing, the size of the bank funds into the stock market also lack of accurate data. Once this is because the bank funds into the market, he is equal to the bank directly exposed to the risk of stock market fluctuations, the risk is extremely high. As a result, Banks' capital market in our country has always been a subject of a crackdown on, have been being expressly called many times.

However, in recent years with the development of financial innovation, many Banks' capital disguised market access was created. At present, the author estimates that bank funds into the stock market should close to 2.5 trillion yuan. 1 trillion of docking with the brokerage, financing (buy two combines the beneficial right of the brokerage), the remaining 1.5 trillion with over-the-counter capital docking.

Must be declared, due to the lack of capital market financing and Banks outside data, the above estimate is just a probably, I'm afraid there is a lot of omissions and errors (error interval about plus or minus 0.5 trillion). But the use of the roughly estimated, can get the basic picture of financial risk.

4, stock market volatility in the financial system and to internal contagious

Plate and based on the former in the face of financing funds into the market, the size of the estimated can now estimate the financing dish of losses, and then judge the stability of the financial system. Estimate method is to use high quality of the first internal financing data (we went unquestioned degree of precise data) to estimate the loss of internal financing disk may bring. Then suppose to take positions outside financing rhythm and internal financing is consistent, but only have higher leverage, to use internal financing plate loss to calculate the losses of the otc.

Because from the beginning of last year to the middle of June, A shares in the pattern of unilateral rise, so we can easily change from internal financing balance estimate to take positions in the different point of financing scale (figure 1).


According to the distribution of chip internal financing, we can estimate when the index fell to a certain point, different financing cost that builds a dish of facing losses. If internal financing has been forced to unwind, and let the index fell to bring losses (someone from the perspective of the stable market at present, have put forward such Suggestions), then we can estimate under the hypothesis of different leverage, index fell to a different location will cost the brokerage. Of course, we need to clear only in the loss of the principal in the calculation, some losses will turn to financing.

Estimates of the results presented in the following figure (figure 2). Draw a diagram that are based on mid-june 2.2 trillion stock brokerage, financing, under the hypothesis of different leverage, the Shanghai composite index points corresponding to different brokers loss. In particular, if the securities financing leverage ratio of 1:2 (corresponding to the financing leverage average over the past year), so, when the Shanghai composite index fell back to the starting point for this round of bull market (2000 points), the loss of the brokerage is about 300 billion yuan. Brokerage earnings interchangeable parts with small size, the losses shall be haven't we estimate error is big, so will not be considered.


Bank losses estimation is more complicated. Mentioned earlier, the bank market funds is estimated at 2.5 trillion. 1 trillion of them were lent securities directly. This money should be a safe (because brokers also won't fall. The remaining 1.5 trillion, estimates that half of the docking the high-risk otc financing, half butt off court financing risk is relatively low in the equity pledge.

From the previous diagram can be seen that a given 2.2 trillion financing scale, if the leverage ratio was 1:3, so when the Shanghai composite index fell to 2000 points, the losses will be in 400 billion. According to this, more than $7000 of bank funds if the docking high-risk otc financing (lever hypothesis is 1:3), it should be in 130 billion. As for the rest of the butt joint equity pledge of more than $7000, less risk, with a 10% loss rate calculation, the scale of losses in 70 billion. The addition of two totaled 200 billion.

So, although there may be 2.5 trillion bank funds into the stock market, when the Shanghai composite index fell to 2000 points, the Banks' loss is 200 billion. Even if it is a big error estimates in the that Banks should be less than 400 billion inner capital losses.

Necessary to say, the above calculation are very extreme, under the premise of should be seen as brokers and Banks loss limit. If financing offer timely liquidated in reality, or is the size of the stock index hitting a not so huge, actual losses will be far less than previous estimates. So, these estimates should be considered to do pressure test the extreme value of the financial system, rather than to predict possible future losses.

Brokerage kui 300 billion, although not fatal, but bone. In 2014, the total assets of 4.1 trillion yuan, brokerage industry industry net worth 0.9 trillion yuan. While all of 2014, brokers only 128.9 billion total profits. Put up the losses of 300 billion, although not let brokerages collective collapse, but more than two years of profits must be put in.

Bank losses, 400 billion, a drop in the bucket. At the end of 2014, the total assets of 131 trillion yuan, the commercial Banks non-performing loans totaled 1 trillion, 2 trillion loan loss provisions. That is to say, the bank only using its loan loss provisions is enough to digest the market bring the loss of money. Therefore, the stability of the bank will not be the influence of stock market turmoil.

As for the other such as P2P, trust in the bias distribution of financial institutions, either not systemically significant, or possible loss is not big, so no threat to the stability of the financial system

Based on the above evaluation, the risk of stock market turmoil in the financial system internal transmission co., LTD., the stability of the financial system can be guaranteed.

5, the influence of the stock market turbulence on the real economy

With the spread of the financial system internal risk assessment, you can estimate the influence of the stock market turbulence on the real economy.

Start with the previously mentioned channels "balance sheet". Stocks fell the most months, a-share market capitalization has disappeared nearly 20 trillion yuan. But it will have little impact on the real economy in consumption. According to the Nobel laureate economist Modigliani proposed "Life Cycle - Permanent Income Hypothesis" (Life Cycle - Permanent Income content), only the consumers believe that the Income increase is Permanent, will increase the Income of most consumed in. This easy to understand. Someone picked up 100 dollars, one day will save most of the flowers slowly. Only he believes that every day can pick up to 100 dollars more, will spend the 100 dollars to most of the day.

From this Angle to observe the A shares rise and fall of the year in the past. It is obvious that the wealth of domestic residents did not bring stock market bull market value as a permanent. In the past year stock sharply bullish, at the same time, the total retail sales of social consumer goods year-on-year growth has fallen from 12.5% in May, 2014 to 10.1% in May. Cars are commonly believed to be the most can reflect the commodity of stock market wealth effect. But domestic car sales year-on-year growth also fell from 7.6% in May last year to 2.1% in May this year.

Obviously, in the past year of macroeconomic data, can not find traces of stock market wealth effect. Investigate its reason, should be a consumer is expected this round of rising stock market is unsustainable, and therefore did not because the increase in the stock market wealth and improve their consumption. Accordingly, in the second half of this year we should also be hard to see the stock market down the negative influence on the consumer.

, on the other hand, in the process of the stock market fell, the stock market financing will be liquidated, and would not let the debt continues to lie prone on investors in the balance sheet. Therefore, even though the stock market positions will bring short-term severe market adjustment, but it also eliminate the possibility of a large amount of debt continues to oppress the balance sheet, and will not let our country into a like Japan's balance-sheet recession.

Next, the stock market wealth indeed may reduce firms use equity pledge for financing ability. But equity pledge financing is small, accounting for the proportion of total social financing shall be no more than 1%. As a result, the shares have the impact on the entity enterprise overall financing ability is very small.

After analyzing the clear channel "balance sheet", and "credit channels". In the total social financing, bank credit is the main part of the absolute, accounting for more than 60% in 2014. While stock financing accounted for only 3% of the poor (figure 3). Even if the stock market next year no financing, the real economy of financing will not be affected by too much.


Under the total social financing pattern, to form a credit crunch in the real economy, it must be the banking system stock market turmoil infection, lending capacity is greatly weakened. And according to the previous analysis, the stability of the bank will not be affected by the stock market turmoil. Accordingly, the bank to the real economy credit will remain stable. The real economy is not going to happen the credit crunch.

Finally, one might think that stock market will fall by destroying the confidence to affect the real economy. Stocks tumbled down, from all walks of life about the economic outlook is expected to be more bleak, thereby reducing consumption investment intention may be, to lower economic growth. This logic makes sense, but it is hard to quantitative analysis. But, think of the impact of general also too won't big.

Or the same idea, great bull market in the past year, we don't see macroeconomic growth expectations are higher because of the stock market bull. The real economic growth did not vary with the stock market to speed up. It means that the stock market is on the real economy is not that important. Therefore, in the process of stocks, even if the market is expected to be so deteriorated, the negative effect on the actual economic activity will be limited.

6 the conclusion

In the past half A month, A shares for financing to leverage and A vicious cycle of stock index fell sharply weaker, total market value of nearly 20 trillion yuan. This turmoil in the stock market, financing plate in its core position. We estimate, in extreme cases, the Shanghai composite index fell to 2000 points, financing plate has been - rough storehouse financing plate can bring the loss of about 300 billion, brokerage cost no more than 400 billion Banks. This scale is not a threat to the system stability of the financial system.

And from financial risks to the entity economy's balance sheet and credit in the two channels, the threat of a stock market turbulence on the real economy, it should not. In short, our country will not because the stock market crash and the financial crisis, the economic crisis. But if the financial activity tends to slump after the stock market crash, GDP growth may therefore lost 0.6% in the whole society.

Due to the possibility of stock market turmoil triggered systemic financial and economic crisis is very small, policy in response to the need to weigh the benefits and costs, and should not be desperate rescue "violence". Compared to the cost of lift index, focus resources to resolve the financing risk of disc may be a better choice.

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