Liquidity is defined in the stock market. As far as the whole market is concerned, liquidity refers to the amount of funds involved in trading relative to the supply of stocks. The funds here include on-site funds, that is, the funds for buying stocks, that is, the total market value of circulation, as well as foreign capital.
Solve excess liquidity
[ 1]
Gold is the money that is still in the stock account and ready to enter the market. If the stock supply remains unchanged, or the growth rate of trading funds is faster than the growth rate of stock supply, even if the company's profit remains unchanged, the stock price will rise, and vice versa. This is a very simple relationship between supply and demand, but this stock price rise is limited. Being sought after by too much or excess funds leads to an excessive rise in the stock price without performance support, which is difficult to last. This kind of capital is what we often call hot money.
The above two kinds of liquidity will be related in most cases, that is, excess liquidity in the economy usually leads to excess liquidity in the stock market, so when the country begins to tighten monetary policy, the stock market will lose its capital supply and perform poorly.
For individual stocks, liquidity is another concept, which refers to the difficulty of stock trading activities, that is, whether it is easy to sell after I buy this stock. We often say that the poor liquidity of this stock means that it is difficult to sell at an ideal price, so the stocks with poor liquidity are mostly small-cap stocks or stocks with high control, which are not suitable for large capital operations. Even if the stock price rises after buying, it can't be sold, which is more risky for big funds, so they prefer those with good liquidity. Small and medium-sized investors are much more free, because the amount of funds is small and there are many choices.
Edit the definition of excess liquidity in this paragraph.
At present, excess liquidity has become an important feature of China's economy and even the global economy.
The so-called "liquidity" actually refers to the difficulty of a commodity trading with other commodities. The measure of difficulty is the speed at which the commodity can be traded with other commodities. When the transaction speed between this commodity and other commodities is accelerated, that is, it is very easy to realize the transaction, there will be excess liquidity; When the transaction between this commodity and other commodities slows down, that is, it is difficult to realize the transaction, the liquidity will be insufficient.
In general macroeconomic analysis, excess liquidity is used to refer to a monetary phenomenon. That is to say, in the realistic economic analysis, the benchmark commodity in the above definition is only regarded as money, because money is also a commodity in essence. The European Central Bank (ECB) defines excess liquidity as the deviation between the actual money stock and the expected equilibrium level.
There are many definitions of inflation, but the basic characteristics of inflation include two aspects: First, the currency in circulation is expanding, that is, the currency is depreciating. Second, the prices of general goods and services generally continue to rise. Paying attention to the concepts of universality and permanence helps to distinguish inflation from other price increases. In addition to the meaning of inflation, inflation also has the meaning of credit inflation and soaring prices. In these senses, we can also understand that money overshooting, credit inflation and sustained general price increase are inseparable.
So, what is the relationship between excess liquidity and inflation? We know that the expected equilibrium level of money stock actually corresponds to the ideal price level. When we talk about excess liquidity, that is, excess money, the expected equilibrium money stock has not changed. At this time, prices have not generally continued to rise. However, because the actual money stock has exceeded the expected level, the price level may generally rise, leading to inflation. There is a certain time lag. If the central bank can control the issuance of money at this time and make the real money stock return to the expected equilibrium level, then the general and sustained rise in the price level may not happen. On the contrary, the price level may generally continue to rise.
What we need to deal with here is the essence of money, how money is oversold, and the transmission mechanism between money oversold and general price increase. In Marshall's view, the word "currency" has great flexibility. If there is no contrary meaning, "money" can be regarded as a synonym for "money". In the financial market, "the value of money" is equal to the discount rate or the interest rate charged for short-term loans at any time. In Thomas Meyer's view, full-value commodity currency refers to the currency whose value as a commodity is exactly equal to that as an exchange intermediary. If the value of money as a commodity itself cannot be completely equal to its value as a currency and cannot be used for (direct) exchange of goods, it is called credit currency.
The author thinks that money is essentially the debt of some people to another people issued by the central bank rather than society. Credit currency is a kind of creditor-debtor relationship, while circulating paper money is actually a special form of bond. When there is excess liquidity, the speed of currency trading with other commodities is greatly accelerated. This shows that the creditors who hold money hope to exchange other commodities for money as soon as possible to realize their claims. Since all creditors want to exchange their money for other commodities, there is pressure to devalue the currency. The faster the currency circulates, the greater the pressure of currency depreciation. At this time, if the bonds in the hands of currency holders cannot be repaid in equal value, there will be a wave of snapping up, soaring prices and inflation in the whole society.
Edit the summary of the reasons for excess liquidity in this paragraph.
Excess liquidity may be caused by many reasons, a single reason or both. Generally speaking, it includes the central bank's expansionary monetary policy (generally including reducing the reserve ratio and interest rate, repurchasing government bonds and putting funds into the market), changes in the economic cycle, defects in the exchange rate system and the influx of hot money. These factors can greatly improve liquidity, and when excessive, it will cause excess liquidity. On the other hand, excess liquidity can also be understood as accompanying or due to inflation, that is, some factors that cause inflation may also cause excess liquidity.
Although China experienced serious inflation in the mid-1990s, and M2 and GDP have remained high in recent years, there was no inflation. Generally speaking, there are several reasons:
The general and sustained rise in the price level.
First, there is a certain time lag from the excessive monetary pressure to the general and sustained rise in the price level of the whole society. Due to the complexity of modern credit money, excessive pressure of money often does not immediately lead to general price increases. The length of this lag period often depends on the accuracy of macroeconomic data, the importance of different price indexes, the expectations of the public and enterprises on the macro economy, and the attitude of the national monetary and financial departments on inflation. We see that although the currency circulation in the real economy is already running at a high level.
Excess liquidity
After a few years, the consumer price index may still be negative; When the monetary authorities reduce the issuance of various currencies in order to curb inflation, the consumer price index may still rise. In this way, the lag effect of price increase relative to excessive monetary pressure will still cause confusion in anti-inflation theory and policy. For example, some people think that the increase of money in China will not bring the pressure of price increase at all, and the price decline caused by insufficient effective consumption demand should be suppressed by the excess of money. This argument understands the time lag effect as there is no necessary connection between the frequent appearance of money and the rise of prices. The "inflation" of "money" will not bring about "inflation" immediately, but the inconsistency in time cannot deny that the over-issuance of money is the most basic reason for the general and sustained rise of the price level of the whole society.
Widening income gap
Second, the income gap has widened. Wealth is concentrated in the hands of a few people, while the marginal propensity to consume of the rich is relatively low. Residents deposit a large amount of income in the bank as expenses for old-age care, medical care and children's education.
Consumer goods enterprises are fiercely competitive.
Thirdly, the fierce competition among consumer goods enterprises blocks the transmission of commodity prices from raw materials to industrial consumer goods prices, from real estate and asset prices to ordinary consumer goods prices.
However, we must also be clear that asset price inflation will also lead to inflation. Mr. Yu Yongding, who just stepped down as a member of the National Monetary Policy Committee, pointed out that only seeing the stability of the price index without paying attention to the rise of financial assets and real estate prices is likely to lead to too loose monetary policy, thus failing to stop the bubble economy in time. He cited the example of Japan. In the late 1980s, Japan's share price and real estate price rose sharply, but the price index was quite stable, so there was no interest rate hike and monetary tightening. After the bubble burst, Japan fell into the worst economic crisis after the war. Yu Xiansheng also reminded that in the current situation that there are a large number of currencies that are over-issued but temporarily deposited as residents' savings deposits (we temporarily call this part of the currency "deposited currency"), the excessive development of the capital market (or the excessive development of the real estate market) is likely to activate the dormant deposited currency, and the temporarily returned currency will return to the circulation field to chase commodities, which will lead to the revival of inflation.
Therefore, excess liquidity is a precursor to inflation, and excess liquidity is only one step away from inflation.
Edit the reasons for China's excess liquidity in this paragraph.
At present, there is excess liquidity in China's banking system, which is the result of many factors at home and abroad. From the internal factors, there are economic structure imbalance, savings and investment tendency greater than consumption and so on. The gap between savings and investment has caused a sharp increase in trade surplus and foreign exchange reserves. According to the current foreign exchange management system, China's foreign exchange income must be sold to the People's Bank of China, and the central bank must increase currency issuance to purchase foreign exchange. Related to this, the trade surplus has increased substantially, the expectation of RMB appreciation has increased, and the inflow of foreign capital has increased substantially. Therefore, the double surplus of trade and capital flow has greatly increased China's foreign exchange reserves. At the end of 2006, China's foreign exchange reserves reached US$ 654.38 billion+RMB 006.63 billion. In order to obtain these foreign exchange reserves, the central bank needs to issue more than 8 trillion yuan, which is the main internal reason for China's excess liquidity. From the external factors, after the "9. 1 1" incident in the United States, the major economies in the world generally implemented low interest rate policies, resulting in an unprecedented increase in the liquidity of major currencies and excess global liquidity. Under the guidance of global economic imbalance, a large amount of capital flows from the United States into emerging economies in Asia represented by China, which is an important external cause of China's current excess liquidity.
Edit this paragraph to solve the problem of excess liquidity and change the credit investment structure.
First, change the structure of credit investment and vigorously develop the credit market for small and medium-sized enterprises and individuals. By creating a good financial ecological environment, standardizing the financial ecological order, strengthening the construction of the whole social credit system, and establishing a standardized and orderly social legal and credit environment with the protection of creditor's rights as the core, we can digest China's growing national savings.
Vigorously develop the capital market and adjust the financial market structure.
Second, vigorously develop the capital market and adjust the financial market structure. Encourage compliance funds to enter the capital market such as stocks, encourage and expand enterprises to raise funds by issuing bonds, and train institutional investors to become the leading force in the capital market. Establish a unified national bond market and a diversified market risk allocation mechanism to effectively allocate financial resources.
Encourage and support product innovation in the banking industry
Finally, encourage and support banking product innovation, adjust the structure of financial products, and ease liquidity. It is necessary to expand the business space of commercial banks; Develop money market funds, including asset securitization, bond derivatives and new products such as interest rate and exchange rate products of various combinations and bond varieties, and develop value-added services for corporate and private wealth management. Develop off-balance-sheet financial custody products of commercial banks and gradually change the lifestyle of commercial banks.
Thoughts on Excess Liquidity and Tight Monetary Policy with China Characteristics
In recent years, China's foreign exchange reserves have grown rapidly, surpassing Japan for the first time in February 2006, becoming the country with the largest foreign exchange reserves in the world. At the same time, we should also see that the excessive growth of foreign exchange reserves has brought a series of problems to China's macro-control. At present, the main problem is excess liquidity, which brings inflationary pressure. In the case that China needs to give consideration to internal and external balance, it has great limitations to adopt general monetary policy tools commonly used in other countries, while the Central Bank of China creatively adopted a tight monetary policy with China characteristics and achieved good results. In order to make these monetary policy tools play a more effective role, we need to start with the source of foreign exchange reserves and take corresponding supporting measures to fundamentally solve the problem of excess liquidity.
First, the limitations of using general monetary policy tools to control China's current excess liquidity.
The introduction of liquidity is formed by increasing the assets of the central bank. The assets of the central bank mainly include loans to the government and commercial banks, holding securities (mainly treasury bonds) and maintaining international reserves. When the assets of the central bank increase, if the financial deposits in liabilities and the deposits of foreign governments and institutions remain unchanged, it will increase the liquidity in the economy. Judging from the actual situation in China, due to the continuous and substantial growth of foreign exchange reserves, especially in recent years, the proportion of foreign exchange reserve assets to the total assets of the central bank has reached more than 60%, which means that more than 60% of the liquidity invested is formed through the channels of the central bank buying foreign exchange. Due to the excess liquidity caused by a large amount of foreign exchange, inflationary pressure has increased. The measures taken by countries to tighten liquidity to control inflation mainly include: raising the statutory deposit reserve ratio, raising the benchmark interest rate, and selling their securities in the open market. However, according to China's current actual situation, these three measures have different degrees of limitations.
(A) the role of raising the statutory deposit reserve ratio is limited.
Generally speaking, adjusting the statutory deposit reserve ratio, a monetary policy tool, will only be taken when a country's macro-economy changes periodically, and even if there is a cyclical change, the frequency of taking this measure will not be too high and the adjustment range will not be too large. However, since July 2006, China's central bank has taken measures to raise the statutory deposit reserve ratio 18 times in two years, from 7.5% to 17.5%, of which 7 times hit a record high. In a short period of two years, the statutory deposit reserve ratio, a policy tool, has been used with a high frequency and a large increase, which is unprecedented in any country in the past. Even so, for tightening liquidity, the current historical high of the statutory deposit reserve ratio is still not the end point, and the central bank still has the possibility of continuing to raise the statutory deposit reserve ratio. This infrequently used tool is used so frequently and on such a large scale in China. In fact, it shows that the monetary policy tool, which will have a great impact under normal circumstances, is not very important in tightening liquidity in China at present, or its lag period is too long, which is extremely unfavorable for controlling the current inflation in China.
(2) Under the current domestic and international economic situation, there is limited room for raising the benchmark interest rate.
Raising a country's benchmark interest rate can restrain demand to a certain extent, thus controlling inflation. But in an open economy, its role will be greatly reduced. According to interest rate parity, due to the profitability of short-term capital, when a country's interest rate level increases, short-term capital inflows will occur. At present, China's expectation of RMB appreciation against the US dollar has not changed. In this case, arbitrage capital basically has no exchange rate risk, which makes the arbitrage cost lower or the income higher. Although China's current capital and financial projects cannot flow freely, there are still many short-term arbitrage speculative capital entering in various hidden ways, which cannot be completely avoided. In addition, the United States recently lowered its benchmark interest rate. In this case, if China adopts the measure of raising the benchmark interest rate again, it will further aggravate the inflow of short-term profit-seeking capital, which is obviously unfavorable to controlling inflation without expecting the RMB to appreciate faster and more greatly.
(C) Limited operating space in the open market
The object of open market operation is national debt or foreign exchange, and the central bank buys and sells national debt or foreign exchange in the open market to expand or tighten liquidity. In tightening liquidity, the central bank should take measures to sell treasury bonds or foreign exchange in the open market. Judging from the actual situation in China, the formulation of monetary policy should consider the exchange rate target, that is, the RMB will not change too fast or too much. With the increasing foreign exchange reserves in China, in order to prevent the RMB from appreciating too fast and excessively, the central bank can not only sell foreign exchange in the open market, but also passively absorb foreign exchange due to the persistent balance of payments surplus, thus forming more foreign exchange reserves. Therefore, the Bank of China can only sell government bonds in the open market at present. As can be seen from the balance sheet of the central bank, as one of the assets of the central bank, the number of national debt is limited. With the continuous increase of foreign exchange reserves, the national debt can only be constantly thrown out by the central bank, and the result will only be that even if the national debt is sold out, it can not effectively offset the increase of foreign exchange reserves brought about by the continuous surplus of international payments. Therefore, under the current economic situation in China, the space for open market operation is limited.
Second, China's characteristic tight monetary policy is to reduce liquidity.
Due to the limitations of the above general monetary policy tools in different degrees, in order to effectively reduce liquidity, China's monetary authorities creatively adopted a tight monetary policy with China characteristics, that is, by issuing bills and purchasing special government bonds, the flexibility of the central bank's monetary policy was improved, and finally the purpose of effectively reducing liquidity and alleviating inflationary pressure was achieved.
(1) The central bank changes the debt structure of the central bank by issuing central bank bills, thus reducing liquidity.
Central bank bills are short-term debt certificates issued by the central bank to reduce liquidity, that is, central bank bonds. The maturity of central bank bills is relatively short, with the longest term not exceeding 1 year. The purpose of issuing central bank bills is to change the debt structure of the central bank by creating new central bank liabilities, thus reducing liquidity. As can be seen from the balance sheet of the central bank, since the buyers of central bank bills are microeconomic entities except the central bank and the Ministry of Finance, issuing central bank bills will reduce the number of basic monetary items such as cash in circulation and deposit reserve of commercial banks, while the number of new non-basic monetary items such as central bank bills will increase. After the issuance of central bank bills, the basic monetary items in liabilities become non-basic monetary items, that is, the cash in circulation and the excess reserves of commercial banks return to the hands of the central bank, thus reducing the liquidity in the economy, but the total liabilities remain unchanged, so the total assets remain unchanged, that is, the liquidity can be reduced without throwing out government bonds. As a unique measure in China, the central bank does not need to reduce its total assets when reducing its liquidity, thus overcoming the limitation of limited operating space in the open market and avoiding the negative effects brought by the use of interest rate policy.
(b) The central bank changed its asset structure by purchasing special treasury bonds, thus enhancing the flexibility of macro-control.
Special national debt is a kind of national debt, so it is called special national debt because it is different from the purpose of issuing ordinary national debt, which is mainly to raise funds, while issuing special national debt is mainly to achieve some special goals different from the purpose of raising funds, such as solving major financial problems or cooperating with other macroeconomic policies to solve problems encountered in macroeconomic regulation and control. So far, China has only issued two special treasury bonds, one is 1998 to supplement the capital of state-owned commercial banks, and the other is in 2007, which mainly solved the problem of excess liquidity by strengthening the flexibility of the central bank's macro-control, and also improved the yield of China's foreign exchange assets.
The foreign exchange raised by the Ministry of Finance in issuing special treasury bonds in 2007 is mainly used for the registered capital of China Investment Co., Ltd., a foreign exchange investment company in China, in order to improve the rate of return on foreign exchange assets in China. From the perspective of macro-control, the final result of the issuance of special government bonds has enhanced the flexibility of macro-control of the Bank of China. According to the law, the Ministry of Finance cannot issue bonds directly to the central bank, so in practice, it adopts the method of "changing hands and crossing the bridge". Judging from the issuance of the first special treasury bonds in 2007, the Ministry of Finance issued 600 billion yuan of special treasury bonds to the Agricultural Bank of China, and after raising RMB funds, it purchased the equivalent foreign exchange from the People's Bank of China. At the same time, the People's Bank of China used 600 billion yuan from the sale of foreign exchange to buy equivalent special government bonds from the Agricultural Bank. In this process, the relationship between the Ministry of Finance and the People's Bank of China is a foreign exchange trading relationship, not a direct lending relationship, so it does not violate the relevant regulations, and at the same time, it also achieves the purpose of changing the asset structure of the central bank. From the following table, we can see the changes in asset structure after the central bank bought special government bonds: the international reserve assets decreased, while the government bonds held by the central bank increased by the same amount. This final result makes the central bank's asset structure change when the total assets and liabilities remain unchanged, that is, it objectively increases the number of national debt, which is conducive to overcoming the limited space for open market operation and increasing the space for open market operation of the central bank. This move provides innovative ideas with China characteristics for the central bank to reduce the liquidity in the economy, and enhances the flexibility and effectiveness of the central bank's macro-control.
Third, the supporting measures of tight monetary policy with China characteristics.
China's characteristic tight monetary policy creatively overcomes the limitations of general monetary policy tools and enhances the flexibility of the central bank's macro-control. In order to make these measures play a better role and fundamentally solve the problem of excess liquidity, some corresponding supporting measures are needed to solve the problem of excess liquidity from the source. Because the direct cause of China's current excess liquidity is the continuous and substantial increase of foreign exchange reserves caused by the balance of payments surplus, we should take corresponding supporting measures from the source of balance of payments.
(1) Improve the quality of foreign trade and enhance the overall competitiveness of products.
Pan Yongyuan believes that the quality of foreign trade refers to the essential reflection of the degree and effect of the basic functions of foreign trade in the operation of the national economy. The specific criteria are: the quality of foreign trade enterprises; Economic benefits and terms of trade of import and export trade; The industrial structure of import and export, the influence of trade on the upgrading of industrial structure, and the contribution to the national economy. These specific standards actually reflect the technical content of domestic products and their competitiveness in the international market. Paying attention to the quality of foreign trade means optimizing the allocation of resources in the international scope to improve domestic production capacity and market competitiveness, so as to make more output and better product quality. Foreign trade based on increasing output and improving product quality is helpful to solve the problem of excess liquidity, because the increase of product quantity and added value requires more purchasing power to realize its value.
1. Vigorously support independent innovation enterprises and cultivate leading products with independent intellectual property rights and brands. From the aspect of export, China should pay more attention to the quality of export products, instead of blindly aiming at expanding the export quantity, so as to avoid the formation of more foreign exchange reserves with low-quality sources and relieve the pressure of excess liquidity. By supporting independent innovation enterprises, enhancing the technical content of export commodities, constantly upgrading products, and actively developing new products, a virtuous circle of high-tech investment → high value-added products export → high income → high accumulation → high growth → high-tech investment will be formed, thus improving China's terms of trade and improving the efficiency of foreign trade. Independent innovation enterprises can be given independent research and development subsidies, financing concessions and tax relief.
2. Actively use external advanced factor resources to promote the improvement of China's production capacity and competitiveness. From the perspective of import, we also need to pay attention to the quality of imported products. Because China's foreign exchange reserves are large at present, but we can't blindly import them in order to consume them and reduce liquidity. Foreign exchange should be used to import advanced production factors that can enhance China's production capacity and competitiveness, such as high-tech new materials and semi-finished products.
(2) Introduce foreign direct investment selectively to improve the quality of foreign investment in China.
Improving the quality of foreign direct investment means that foreign direct investment can not only promote the increase of China's output, but also bring a certain degree of knowledge and technology spillover, promote the improvement of China's overall technical level, consume less non-renewable resources and do less damage to the ecological environment. Judging from the current macroeconomic environment in China, capital is not a weak link, but a technical level and competitiveness in the international market. Therefore, the introduction of foreign direct investment should focus on the quality rather than quantity of foreign direct investment, and introduce foreign direct investment selectively.
1. Establish an index system for evaluating the quality of foreign direct investment. The quality of foreign direct investment can be evaluated by the energy consumption per unit output, the degree of environmental pollution, the number of employees, the tax paid and the technical content of products, among which energy consumption and environmental pollution are given greater weight, and more foreign direct investment projects with excellent product quality, low energy consumption, strong technology spillover, little damage to the ecological environment and strong driving force can be introduced. Foreign direct investment with high energy consumption and great damage to the ecological environment can be basically ignored.
According to China's industrial policy, foreign direct investment enjoys the same national treatment as domestic enterprises. Cancel the preferential treatment previously given to all foreign-invested enterprises in taxation and finance, and introduce foreign direct investment selectively. According to the guidance of China's industrial policy, high-quality foreign direct investment is given the same national treatment as domestic enterprises. In other words, foreign direct investment enterprises with high knowledge and technology spillover, low energy consumption and low environmental pollution enjoy the same preferential policies as domestic enterprises.
3, special supervision of foreign direct investment enterprises, make a reasonable evaluation. Special supervision mainly depends on whether the operating results of foreign direct investment enterprises are consistent with the original expectations, that is, comparing the results with relevant evaluation indicators before the introduction, making reasonable evaluations and summing up experiences and lessons, which will help to improve the quality of foreign direct investment in the future.