As Xi Jinping, general secretary of the Communist Party of China (CPC), announced that more than 700 million rural poor people in China have been lifted out of poverty and that “the battle against poverty has been fully won”, the National Finance and Development Laboratory of the Chinese Academy of Social Sciences (CASS), the Institute of Finance of CASS and the Chinese Social Science Press released on Friday (26) a new book regarded as a “national ledger China’s national balance sheet 2020”, a new book. According to the report, China’s overall financial risk is still at a high level and tends to be concentrated in the government and public sector. The report specifically mentions that net social wealth per capita is about 482,000 yuan.
The China National Balance Sheet 2020 compiles data on China’s national balance sheet for a total of 20 years, from 2000 to 2019. According to Sina.com, China’s total social assets rose from nearly RMB 1,400 trillion in 2017 to RMB 1,655.6 trillion in 2019. As for liabilities, total social liabilities in 2019 amounted to RMB 980.1 trillion, and net social assets were RMB 675.5 trillion, of which net social wealth per capita was about 482,000 yuan. The wealth of the residential sector is 512.6 trillion yuan, and the per capita wealth of residents is about 366,000 yuan.
According to the report, China has accumulated a lot of wealth during the 40 years of reform and opening up, but at the same Time, it has also accumulated a lot of “institutional and structural” problems and risks. During his tenure, Xi Jinping, general secretary of the Communist Party of China (CPC), proposed “three major battles”, namely, precise poverty eradication, pollution prevention and control, and prevention and resolution of major risks, and the CPC official took “prevention and resolution of major risks” as the first of the “three major battles”. The first of the “three major battles.
According to the report, after more than three years of governance, the risk has eased. From the financial leverage ratio, its peak appeared at the end of 2016, to 2019, the financial leverage ratio back down to the level of about 2013. However, the “country book” points out that China’s overall financial risk is still at a high level and tends to be concentrated in the government and public sector.
The report says that China’s macro leverage ratio has risen sharply under the impact of the New Guinea virus, further increasing overall financial risk. As of the third quarter of 2020, China’s macro leverage ratio reached 270.1%, very close to the global leverage ratio of 273.1%.
When it comes to the distribution of risks in 2018, financial institutions and the government sector have the top two shares of risk-taking: 54.5% for financial institutions and 17.7% for the government sector, with the rest being 9.4% for the residential sector, 13.8% for the corporate sector, and 4.6% for the foreign sector, respectively.
The book mentions that “considering the overwhelmingly state-owned nature of China’s financial enterprises, coupled with the fact that even for private financial institutions, there is ultimately a government bailout problem, the associated risk losses are ultimately paid for by the government.” Assuming that 80 percent of financial institutions are guaranteed by the government, the final financial asset risk borne by the government sector is 61.3 percent.
As for liabilities, the corporate sector accounted for 63.1 percent of China’s total real economy debt in 2018, compared with 21.8 percent for the residential sector and 15.1 percent for the government sector. The book estimates that the share of SOE debt in corporate sector debt rose from 57% at the beginning of 2015 to 67% at the end of 2018.
According to the report, the broad government or public sector bears about 60% of the financial risk, analyzed in terms of assets or liabilities.