Page 72 - 2020 White Paper on the Business Environment in China
P. 72
and the burden has weighed on the economy as more and more defaults occur. This also led to an increasing
incremental capital-output ratio (ICOR)16 that suggests diminishing aggregate return to capital. It suggests that
massive investment booms are no longer a policy option as they result in marginally smaller boosts to economic
2020 Wgrhowitteh dPesappiteesrigoninficathntley hBiguhesricnoests.s Environment in China
Fig 14 Diminishing return of capital investment as the total debt burden increases
7However, concern remains among policym260akers technology in a group study session of the CPC
240 Central Committee Political Bureau on 24 October
in 6terms of actual lending to the private 2019 18. He highlighted that due to its advantages of
5 s22e0 ctor, traceability and transparency, blockchain technology
can be used to solve problems involving lending
pa4rticularly small businesses with real eco2n00 omic % of GDP transaction costs, information imbalance risk and
RMB t x 180 fund misallocation in order to expand affordable
credit to small businesses.
de3mand. The situation has deteriorated am1i60d the
Shenzhen Fintech Institute, a subsidiary of the
cra2ckdown on shadow banking, from which112400small Institute of Digital Currency in People’s Bank of China
(PBoC), announced a joint research program with the
bu1sinesses with little collateral or credit histor1y00 were Hong Kong Monetary Authority on blockchain on 6
0 80 November 201919 . With Shenzhen’s background in
able to find financing.1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 technology adoption, it likely suggests that the pilot
ICOR (5YMA) Credit leverage (RHS) program on China’s digital currency may soon begin
in Shenzhen.
Source: Wind
Capital market reform to expand to the
However, concern remains among policymakers in terms of actual lending to the private sector, particularly ChiNext board
Fig 14 Crackdown on shadow banking instrumentssmall businesses with real economic demand. The situation has deteriorated amid the crackdown on shadow On 10 October 2019, Yi Huiman, Chairman of the
abamnkinigd, frotmhwehichPsBmaoll bCus’isnescseos nwitch elittrlencololatneralCorhcreidnitahis’tsoryfwinereaabnlectoiafinld friniasncking. China Securities Regulatory Commission (CSRC),
said during a special visit to Shenzhen that the
Fig 15 Crackdown on shadow banking instruments amid the PBoC’s concern on China’s financial risk commission is ready to deepen the capital market
reform in Shenzhen20 in order to strengthen the
Total social financing 15 role of the financial market in supporting the real
4 14 economy. Specifically, the Shenzhen Stock Exchange
13 may also be in the process of setting up a registration-
3 12 based IPO system on the ChiNext board. This may
11 be modeled after the scheme started in Shanghai’s
2 10 %YoY STAR market, which appeals to enterprises to list at
9 home rather than overseas through more market-
1 oriented criteria.
0 A National Champion in Structural
Reforms
-1
Uncertainties linger amid slowing economic
Aug-16 Feb-17 Aug-17 Feb-18 Aug-18 Feb-19 Aug-19 growth and trade disputes
Others
RMB loan Shadow banking instruments Total TSF (RHS) We note that Shenzhen’s development could still
be subject to a number of uncertain factors in the
Source: Wind near term:
15 www.financialnews.com.cn/cj/zczx/201905/t20190514_159846.html 18. www.xinhuanet.com/politics/xxjxs/2019-10/29/c_1125164384.
16 ICOR refers to the capital investment required to generate an additional unit of national htm
outpuSthenzhen may soon become a pilot area for 19. www.hkma.gov.hk/gb_chi/news-and-media/press-
releases/2019/11/20191106-3/
China’s digital currency
20. www.xinhuanet.com/fortune/2019-10/11/c_1210307841.htm
In view of the situation, policies have recently
been announced to increase the use of technology
to facilitate lending to small businesses. On 16
September 2019, the National Development and
Reform Commission (NDRC) pledged15 to establish
a national credit rating system to fully unleash the
potential of a credit rating system in the economy
to ease the information imbalance between
lenders and the real economy. The process will
rely on FinTech to prune risky segments in the
market, reduce financing costs and meet diverse
investment demand16.
This is a particularly important policy area for
Shenzhen. The Shenzhen Business Registration
Bureau reported that 90% of businesses in Shenzhen
are privately owned, and with 241 business entities
for every 1,000 residents in Shenzhen, the city has the
highest density of business owners in the country17 .
This is the backdrop that put Shenzhen again in
the spotlight when President Xi Jinping expressed
his enthusiasm for blockchain as a digital currency
15. www.gov.cn/xinwen/2019-09/16/content_5430181.htm
16 FinTech to take off as a key driver for China’s high-quality growth,
EY, 2019
17. www.xinhuanet.com/fortune/2019-11/01/c_1125181817.htm
72
incremental capital-output ratio (ICOR)16 that suggests diminishing aggregate return to capital. It suggests that
massive investment booms are no longer a policy option as they result in marginally smaller boosts to economic
2020 Wgrhowitteh dPesappiteesrigoninficathntley hBiguhesricnoests.s Environment in China
Fig 14 Diminishing return of capital investment as the total debt burden increases
7However, concern remains among policym260akers technology in a group study session of the CPC
240 Central Committee Political Bureau on 24 October
in 6terms of actual lending to the private 2019 18. He highlighted that due to its advantages of
5 s22e0 ctor, traceability and transparency, blockchain technology
can be used to solve problems involving lending
pa4rticularly small businesses with real eco2n00 omic % of GDP transaction costs, information imbalance risk and
RMB t x 180 fund misallocation in order to expand affordable
credit to small businesses.
de3mand. The situation has deteriorated am1i60d the
Shenzhen Fintech Institute, a subsidiary of the
cra2ckdown on shadow banking, from which112400small Institute of Digital Currency in People’s Bank of China
(PBoC), announced a joint research program with the
bu1sinesses with little collateral or credit histor1y00 were Hong Kong Monetary Authority on blockchain on 6
0 80 November 201919 . With Shenzhen’s background in
able to find financing.1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 technology adoption, it likely suggests that the pilot
ICOR (5YMA) Credit leverage (RHS) program on China’s digital currency may soon begin
in Shenzhen.
Source: Wind
Capital market reform to expand to the
However, concern remains among policymakers in terms of actual lending to the private sector, particularly ChiNext board
Fig 14 Crackdown on shadow banking instrumentssmall businesses with real economic demand. The situation has deteriorated amid the crackdown on shadow On 10 October 2019, Yi Huiman, Chairman of the
abamnkinigd, frotmhwehichPsBmaoll bCus’isnescseos nwitch elittrlencololatneralCorhcreidnitahis’tsoryfwinereaabnlectoiafinld friniasncking. China Securities Regulatory Commission (CSRC),
said during a special visit to Shenzhen that the
Fig 15 Crackdown on shadow banking instruments amid the PBoC’s concern on China’s financial risk commission is ready to deepen the capital market
reform in Shenzhen20 in order to strengthen the
Total social financing 15 role of the financial market in supporting the real
4 14 economy. Specifically, the Shenzhen Stock Exchange
13 may also be in the process of setting up a registration-
3 12 based IPO system on the ChiNext board. This may
11 be modeled after the scheme started in Shanghai’s
2 10 %YoY STAR market, which appeals to enterprises to list at
9 home rather than overseas through more market-
1 oriented criteria.
0 A National Champion in Structural
Reforms
-1
Uncertainties linger amid slowing economic
Aug-16 Feb-17 Aug-17 Feb-18 Aug-18 Feb-19 Aug-19 growth and trade disputes
Others
RMB loan Shadow banking instruments Total TSF (RHS) We note that Shenzhen’s development could still
be subject to a number of uncertain factors in the
Source: Wind near term:
15 www.financialnews.com.cn/cj/zczx/201905/t20190514_159846.html 18. www.xinhuanet.com/politics/xxjxs/2019-10/29/c_1125164384.
16 ICOR refers to the capital investment required to generate an additional unit of national htm
outpuSthenzhen may soon become a pilot area for 19. www.hkma.gov.hk/gb_chi/news-and-media/press-
releases/2019/11/20191106-3/
China’s digital currency
20. www.xinhuanet.com/fortune/2019-10/11/c_1210307841.htm
In view of the situation, policies have recently
been announced to increase the use of technology
to facilitate lending to small businesses. On 16
September 2019, the National Development and
Reform Commission (NDRC) pledged15 to establish
a national credit rating system to fully unleash the
potential of a credit rating system in the economy
to ease the information imbalance between
lenders and the real economy. The process will
rely on FinTech to prune risky segments in the
market, reduce financing costs and meet diverse
investment demand16.
This is a particularly important policy area for
Shenzhen. The Shenzhen Business Registration
Bureau reported that 90% of businesses in Shenzhen
are privately owned, and with 241 business entities
for every 1,000 residents in Shenzhen, the city has the
highest density of business owners in the country17 .
This is the backdrop that put Shenzhen again in
the spotlight when President Xi Jinping expressed
his enthusiasm for blockchain as a digital currency
15. www.gov.cn/xinwen/2019-09/16/content_5430181.htm
16 FinTech to take off as a key driver for China’s high-quality growth,
EY, 2019
17. www.xinhuanet.com/fortune/2019-11/01/c_1125181817.htm
72
