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Measuring and Comparing the Leverage Ratios of Real Economy in China (No.166, 2019)
2019-11-05
By Li Yifei & Yan Yan, Economic Research Department, Management World, Wang Zhuquan, Tan Yunxia & Song Xiaobin, Ocean University of China
Research Report, No.166, 2019 (Total 5666) 2019-9-19
Abstract: Accurate measurement of the leverage ratios of the real economy sector is the foundation of “structural deleveraging” and also the basis of “guarding the bottom line of financial risks”, which is of great strategic significance for the healthy development of China’s economy. This paper, based on the 2008-2017 data of China’s listed non-financial enterprises, with the measurement system of double leverage ratios, that is, debt-to-revenue ratio and debt-to-capital ratio, precisely reveals the regional distribution of the real leverage risk of the non-financial enterprises, determines the reasonable threshold of the leverage ratio of the non-financial enterprises in each region according to their respective actual development level of the non-financial enterprises, and then determines their regulatory direction and intensity of the leverage ratios. It is advisable to design leverage ratios that can reflect the true level of risk in a scientific way, properly match risks and returns to determine the threshold of leverage ratios, set a region-specific threshold standard of leverage ratio according to the capital value creation ability of the region and its tolerance degree of real enterprises to deleveraging, clarify “bottom lines” for structural deleveraging, and focus on controlling the financial risks of high-risk enterprises.
Key words: leverage ratio, structural, double measurement of leverage ratios
