Economic History: the basic situation of finance and credit in the supply of construction funds in the 1980s

2022-05-27 0 By

The construction fund supply of state economy has been mainly from finance and credit for many years.The proportion of special funds controlled by enterprises and competent departments is very small during the first Five-Year Plan period.In 1953, for example, extrabudgetary funds were equivalent to only 4 per cent of national budget revenues, of which such earmarked funds accounted for 61 per cent, i.e. they were equivalent to only 2.4 per cent of budget revenues.The situation has changed markedly in recent years.The number of dedicated funds managed by companies and authorities is growing rapidly.In 1981, for example, extrabudgetary funds accounted for 60 per cent of state budget revenues, of which 79 per cent, or 47.4 per cent, was accounted for by such funds.Even with the emergence of such a tripartite situation of finance, credit and extrabudgetary funds, finance and credit still dominate the supply of construction funds.This is not only because they still account for two-thirds of the total supply of funds, but also because they are concentrated.Put aside the non-centralized capital for a moment to investigate finance and credit, in the supply of construction funds, their position has also undergone prominent changes in recent years.During the five-year Plan period, government revenue totaled 135.49 billion yuan, of which 65.59 billion yuan was spent on economic construction (excluding additional bank credit funds), accounting for half of the total government revenue.Banks’ assets grew by less than a tenth of their revenues during this period, excluding the fiscal boost to credit funds.The issuance of bank credit is basically used to support economic construction, so from the perspective of construction fund supply, the supply of bank credit is less than one fifth of the financial supply.The situation at that time was as follows: the need for capital investment, the need for additional working capital in industrial enterprises, the cost of various economic projects, and the need for financial support for agriculture were all financed by the public finance.As for banks, before and after the founding of the People’s Republic of China, their basic activities can be said to be the issuance of renminbi to cover fiscal deficits.When inflation was stopped and the financial situation became better, the bank’s credit business shifted to supporting state-owned and cooperative businesses, controlling important sources of industrial goods through processing orders, and controlling grain and agricultural raw materials through purchasing agricultural and sideline products, so as to ensure market control.During the first Five-Year Plan period, loans were gradually extended to state-owned industries to support their partial, but limited, need for additional working capital.Faced with such a limited task, the capital sources of banks are still insufficient to meet the demand of capital utilization. If funds are gathered by means of credit alone, the necessary inventory of state-owned businesses cannot be maintained due to the shortage of capital sources, and other demands that are suitable to be supported by means of credit cannot be guaranteed.This contradiction is resolved through fiscal support for credit.There are two ways: one is to increase the allocation of credit funds;2 it is to keep the necessary fiscal balances fiscal power greatly higher than that of the credit, and credit balance depends on financial guarantee, at the same time, the concentration of money supply, so, in the supply of construction funds, is financial and decisive, and the financial credit decision role in the overall balance is finance.At that time, the requirement of balance of financial income and expenditure actually includes the content of ensuring balance of credit income and expenditure.Achieved the balance of fiscal revenue and expenditure, of course, is equal to the realization of a comprehensive balance of fiscal credit.This situation remained largely unchanged until the end of the decade of civil strife.During the 11 years from 1966 to 1976, the total growth of bank capital sources, including the credit funds allocated annually by the finance ministry, was still basically at the level of the first Five-Year Plan period, although slightly higher than the total accumulated fiscal revenue.Since 1979, however, things have changed.In terms of fiscal revenue, the domestic fiscal revenue in 1979 was 106.8 billion yuan, 5.51 billion yuan less than that in 1978.In 1980 and 1981, the domestic fiscal revenue was 104.22 billion yuan and 101.638 billion yuan, respectively, which continued to decline.Domestic fiscal revenue in 1982 was 108.394 billion yuan, only slightly higher than that in 1981.If we look at the proportion of fiscal revenue to national income, the trend of decline is particularly prominent, and it continued to decline until 1982.During the first Five-Year Plan period, the ratio was 32.7; during the second five-year Plan period, 38.6; during the three-year adjustment period, 34.2; during the Third five-year Plan period, 34.2; during the fourth Five-year Plan period, 32.0; 33.1; and 37.2.In the face of falling revenues, spending has been squeezed hard, but the deficit is still sizeable, even taking into account receipts from foreign debt and domestic Treasury bills.In 1980, it was 12.75 billion yuan. In 1981 and 1982, it was still 2.54 billion yuan and 2.934 billion yuan respectively.While we are making great efforts to reduce expenditures, there is little room for cutting some expenditures, such as those for culture, education, science and health, national defense and combat readiness, and administrative expenses. Some expenditures need to be increased to make up for the debts incurred during the ten years of civil unrest.Therefore, the economic construction expenditure cannot but show a rapid decline in the situation.In that connection, additional allocations to the credit Fund were discontinued in 1980 and working capital allocations were established in 1981 for newly established enterprises only.All funding for this purpose has now been stopped.But more important is the reduction in funding for infrastructure.According to the statistics bureau of capital construction investment owned by the whole people, among them, the state budget investment used to occupy a decisive position, but since 1980, the proportion of the decline is great.At a time when the balance of payments is tight and in deficit, the banks’ ability to gather capital has suddenly increased greatly.Over the past two decades, total bank funding has increased by only about 10% a year.Except for the special case of severe credit expansion in the late 1950s, there were only occasional years when the growth exceeded 10 billion yuan.Since 1979, the total amount of bank funding has risen sharply.Compared with 1978, 1979 witnessed a sharp increase of more than 30 billion yuan. If we compare the annual increase in credit funds with the national income of the year, it is equivalent to 12.5 percent in 1980, 10.8 percent in 1981 and 8.7 percent in 1982, but the proportion in the past was much smaller.On the basis of increasing capital strength, the short-term credit business that banks have always engaged in increased rapidly correspondingly: in 1979, it increased by nearly 20 billion yuan compared with 1978, and the annual growth in the following three years was 30.709 billion yuan, 32.212 billion yuan and 21.937 billion yuan respectively.At the same time, bank lending has extended to fixed assets.In 1979, the government proposed to issue medium – and short-term equipment loans. By the end of that year, the balance of loans was 792 million yuan. By the end of 1982, according to the published figures, it had reached 15.198 billion yuan (excluding such loans from the People’s Construction Bank of China), with an average annual increase of nearly 5 billion yuan.Moreover, starting in 1982, banks began to make long-term capital loans.In addition, in order to make up for the fiscal deficit, banks have lent a large amount of financial loans since 1979, with a balance of 17.023 billion yuan at the end of 1982.The situation cited above shows that: in the past years, the supply of construction funds was mainly concentrated, among which finance played a decisive role;In recent years, great changes have taken place, not only a large number of non-centralized construction fund supply, and in the centralized supply, there has been a situation of equal balance between finance and credit, that is, the annual increase of bank capital power has been close to or even equal to the amount of financial expenditure for economic construction.It should be pointed out that the above analysis of credit problems did not take into account the foreign exchange funds organized by the Bank of China and the credit funds organized by the People’s Construction Bank of China;When they are taken into account, the parity is even more pronounced.Since there is such a situation, then in the area of centralized capital supply, it means that the main transformation from a channel to the mutual cooperation of two channels.Therefore, in organizing the comprehensive balance of finance and credit, we should pay attention to both finance and credit as well as their correct coordination.Otherwise, it is difficult to ensure comprehensive balance.There are probably two main reasons for this shift.One is the reform of the economic management system, which has expanded the autonomy of enterprises.In the past, the profits of state-owned enterprises, after paying industrial and commercial taxes, were basically concentrated in finance through the profit handover system.Depreciation fund, sometimes to the Treasury, sometimes allowed to keep part.As a result, companies have no funds at their disposal except for funds from the government and loans from banks.As enterprises expand their independent authority, the system of unified income and unified expenditure is gradually broken through.Companies are increasingly being allowed to set aside a portion of their profits for special funds.The budget report of 1982 provided such figures: from 1979 to 1981, more than 28 billion yuan was left at the disposal of enterprises through the implementation of the enterprise fund system, the retention of profits and the retention of profits and losses.In addition, there are funds under various names belonging to departments and local governments.In the past, government agencies, organizations, troops and schools were required to turn over budget appropriations if there was any surplus at the end of the year, but now they are allowed to keep them.So these funds have extra money on their hands.Banks have also set up time deposits for this purpose.If the scattered funds in the hands of enterprises, departments, organs and units are handed over to the finance, the finance has the right to use them, and the expenditure will be arranged immediately.Now it’s spread out underneath, and in fact the owner doesn’t use all of it, but the part that doesn’t use it, the bank controls it.This process from the original concentration of financial funds into bank credit funds, its essence is to increase the amount of money in circulation, but also cause the accumulation of potential money.Therefore, the greater the expansion of the power of enterprises and units, the greater the power of banks to gather funds relative to finance.Another is the growth of household monetary income.In the past many years, the currency income of the worker is relatively low, and many years do not transfer capital, do not transfer grade, owe accounts.In this case, the majority of working families have no spare money, and obviously the savings potential is unlikely to be much.The monetary income of the peasants was more limited by the glacial pace of the commercialization of agriculture.Even if there are pockets of cash and savings in rich places, they do not change the general trend.