1 Theory of Moderate Debt:CanModerately Higher Debt Rate Help Improve the Profit Level of Industrial Enterprises?— with Evidence of Time-Series Data from 2002 to 2016

1.1 Introduction

With global financial crisis triggered by the 2008 U. S. subprime crisis, and the series of pain events, say, European debt crisis making people feel restless, the public's trust towards enterprise debt financing has dropped to the lowest point. Under this situation, in some countries, commercial banks and other financial institutions start to manage their asset side with a much more micro and prudential attitude, and some of the foreign enterprises also become uneasy about the normal debt operation. To achieve economic recovery, the U. S. Federal Reserve Committee launches the“QE1 plan”, buying in the government supported enterprise bonds in the open market to reduce the default risks caused by the debt operation. Meanwhile, Europe and Japan also put forward“the European version of QE program”and“the Japanese version of QE program”so as to reduce the default risks caused by the debts.

In 2015, Chinese Premier Li Keqiang in the executive meeting of the State Council proposed that enterprises should de-leverage and reduce their financing costs. What's more, the famous economist and research fellow in Chinese Academy of Social Sciences Li Yang also believes that enterprises in China should control their debt level. However, the fact is that China has actually taken a moderately loose monetary policy in recent years, and the central bank also lowers the benchmark interest rate of deposit and loan several times:In January,2017, China's total social financing scale achieved 3,737.703 billion yuan, and its loaning scale in commercial banks was 2, 313.285 billion Yuan, reaching an unprecedented height. Are there any reasons for these two simultaneously adopted but seemingly contradictory approaches, say, deleveraging on the one hand and increasing the enterprise debt financing scale on the other hand？

Many Chinese local governments, financial institutions and entrepreneurs are actually confused about the future pros and cons of the debt operation. Can improved debt asset ratio help increase enterprise profit? Why should Chinese financial institutions inject more liquidity into enterprises? To answer these questions, people need to find out the reasons and rules behind these financial phenomena through both the macro and micro analysis of the enterprise operating data.