#财经新势力#
Interest-bearing liabilities, which used to expand against the backdrop of low interest rates, have become a heavy burden for global companies. Today, fifteen years after the 2008 financial crisis, the interest-bearing debt balance of 7,700 companies worldwide has reached about $13 trillion, doubling since the end of the financial crisis.
With the Federal Reserve raising the US dollar interest rate and the current interest payment burden at an all-time high, the financial operation and cash flow crisis facing companies themselves may have just begun.
The Nihon Keizai Shimbun compiled data for 7,689 companies around the world that can be compared sustainably after the financial crisis, and found that the balance of interest-bearing liabilities at the end of April-June 2023 reached $12.7581 trillion, an increase of 92% compared to $6.6 trillion at the end of October-December 2008.
The increase in the global corporate debt squeeze may in a sense signal a return to the debt crisis.
In fact, in response to the global credit crunch triggered by the Lehman crisis in September 2008, the US Federal Reserve lowered its benchmark interest rate to close to 0% in December of the same year, launching a de facto zero interest rate strategy.
At this point, the global economy has begun the era of monetary quantitative easing.
In addition to the US lowering its benchmark interest rate, the $4 trillion stimulus package we launched at the time became a feature of monetary quantitative easing in a sense.
Under such a background of monetary easing, the borrowing cost of enterprises is reduced, and the interest-bearing liabilities of natural enterprises are also rising, and quantitative easing monetary policy is conducive to expanding investment and stimulating economic growth, but at the same time, excessive corporate debt also lays risks for the next economic crisis.
In 2020, when the coronavirus pandemic contracted economic activity, many companies stepped up their defenses and accelerated the financing of cash reserves.
The trigger for the 2008 subprime mortgage crisis in the United States was Lehman Bank's housing loans to individual borrowers with low credit ratings, which turned from subprime loans to bad debts.
With corporate debt-to-GDP ratios at historic highs, economic weaknesses and even risks are shifting to businesses, not households.
After the financial catastrophe that wiped out trillions of dollars of global assets fifteen years ago, the United States, Europe, and even continental and other advanced economies stimulated economic growth through quantitative easing.
But as debt became high and central banks began to tighten their currencies, economic growth slowed.
To some extent, debt can indeed stimulate economic development, but the example of the subprime mortgage crisis shows that the rapid growth of household debt, especially home mortgages, can be dangerous.
In 2007, the subprime mortgage crisis, which was extended by the accumulation of real estate bubbles, broke out, and the debt ratio of American households reached 98.63%.
Debt stimulates the economy by enabling individuals or businesses to make major investment decisions today, such as buying a home or expanding production, as collateral for future income.
But as the subprime mortgage crisis demonstrated, the rapid growth of household debt, especially home mortgages, can be very dangerous.
The spirit of contract is actually the core essence of modern commercial society, a person can borrow from the bank to buy a house, and the enterprise can borrow money from the bank to expand production, which is essentially a recognition that the enterprise or individual can fulfill the contract.
However, too much debt may undermine the ability of enterprises or individuals to perform contracts.
Of course, the same is true for localities.
Taking Xiamen as an example, according to the household debt ratio report released by HSBC in early 2019, the household debt ratio of Xiamen in 2017 was as high as 181%, ranking second in China.
In 2016, Yang Xianling, the former president of the Chain Home Research Institute, calculated that the debt ratio of Xiamen residents reached 97%, far higher than the domestic average of 45%.
There are three main ways to calculate the resident debt ratio, one is to calculate the ratio of total resident liabilities to residents' total assets, one is to calculate the ratio of residents' liabilities to deposits, and the last is to calculate the debt level of residents' total liabilities and GDP, which is also the lowest calculation result.
Yang is using a third approach, and the debt ratio of 97% households in Xiamen is comparable to that of US households at the height of the subprime mortgage crisis in 2007, higher than in 2008.
HSBC uses the second calculation.
The biggest driver of rising residents' debt is housing.
According to the China Financial Survey compiled by the Southwest University of Finance, domestic households spend more than seventy percent of their household savings on buying houses, and 60.5% of loans are also used for housing loans.
In 2017, the down payment for a 100-square-meter house in Xiamen was equivalent to the savings of 2.7 local households. By analogy from Xiamen, in the past era of vigorous growth of the real estate industry, it is completely conceivable how many families' savings were hollowed out.
Of course, it also makes many families bear heavy mortgages.
According to data from the Xiamen Bureau of Statistics, the number of residential land launches was controlled from 2009, from 43 plots of land to 8 in 2015.
The decrease in land supply indirectly led to the rise in housing prices, and 2015 and 2016 were the fastest two years of land transaction price increases in Xiamen, reaching 63% and 205%.
Meanwhile, revenue from local land transfers rose 225 percent between 2009 and 2017, from $13.7 billion to $39.1 billion.
But even this cannot stop the rapid growth of local debt and high risks.
According to the International Monetary Fund, local debt reached 16.7 trillion yuan in 2017, an increase of 1,810% over 2013.
Coupled with the epidemic in the past three years, a former minister said that local debt has increased by trillions of yuan, and these epidemic prevention expenses, coupled with the downturn in real estate, have aggravated the risk of local debt and have to be put on the table.
The debt problem, especially mortgage debt, is largely related to asset prices, and once house prices fall, we will inevitably fall into a crisis similar to Japan's, where huge debt makes consumption and investment sluggish, and not only that, but people and companies will also take the money they earn to pay off debt, rather than spend and receive more.
This phenomenon of repairing the balance sheet has now become faint.
But more importantly, it may be more of a cyclical problem.
As the Austrian school of economics believes, monetary tightening or easing, the economic cycle also hovers between growth boom and fading, human beings since the market economy, economic crisis has never been avoided, after prosperity is eventually underestimated, and we can only try to respond before underestimation comes.
Since cycles are unavoidable, the only thing we need to do is be prepared to deal with them.
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Author: Luo Sir, the workplace reference of the new youth. Concerned about the logic behind the development of things, optimistic pessimists. Follow me and grind up the knowledge to show you.