9th ”Theory and Policy” Seminar in NADS, RUC

Presenter: ZHONG Ninghua, Professor of the School of Economics and Management and Director of Department of Economics and Finance, Tongji University

Time: 9:30-11:00, May 18th, 2018

Venue: 916 Meeting Room, Chongde Building West Wing, Renmin University of China

Introduction: Should China's economy be de-leveraged or leveraged? Based on an analysis of the debt ratio of nearly 4 million Chinese industrial enterprises above designated size during the period of 1998-2013, this paper provides three aspects of evidence to provide an initial answer to this question. First of all, why is leverage rate high? We found that during the 16-year period, the sample companies showed a significant and overall trend of deleveraging, and the average debt ratio continued to drop from 65% in 1998 to 51% in 2013; at the same time, significant increases were noted. Leveraged ones are thousands of large, state-owned, listed companies. Second, does the change in leverage rate have the support of corporate fundamentals? We find that the relationship between the characteristics of private enterprises and their debt ratios is highly consistent with that of Western companies; however, firm-level factors are less likely to explain the debt ratio of state-owned enterprises. Third, how does the capital provider influence the debt ratio of the company? Our results show that, on the one hand, the allocation of funds to state-owned enterprises is becoming more and more biased; on the other hand, the phenomenon of “zombie” companies with negative profits is more likely to obtain loans may exist before 2008, and even after 2008 Significant.