What is a systemic financial crisis?

There are four basic types of financial crisis: currency crisis, banking crisis, debt crisis and systemic financial crisis.

Systemic financial crisis can be called "all-round financial crisis", which refers to serious chaos such as currency crisis, banking crisis and foreign debt crisis in major financial fields at the same time or one after another. Systemic financial crises are those that affect the entire financial system and even the entire economic system, such as the American financial crisis that triggered the Great Depression in the 1960s, the Japanese financial crisis that caused Japan's economic malaise in the 1990s, and the Asian financial crisis that hit Southeast Asia in the second half of the 1960s. These crises spread from one financial market to another, such as from the stock market to the bond market, foreign exchange, real estate and even the whole economic system. China is not only impossible, but also ineligible for a systemic financial crisis.

There are many reasons for the systemic financial crisis, but they can be summarized as follows:

First, systemic financial crises often occur in market-oriented countries and regions where financial economy, financial system and financial assets are relatively prosperous. Crisis comes from prosperity. Where can there be a crisis without prosperity? Similarly, there is no financial crisis in African countries with backward economic development. According to my financial tree ecosystem theory, financial economy (crown) is based on agricultural economy (root) and industrial economy (trunk). Although China has successfully transformed from an agricultural economy (tree roots) to a basic industrial economy (tree trunks), it is still far from a crown economy, that is, a financial economy. The proportion of financial assets in China's total assets is very small. China has not established a systematic financial system, and the correlation between financial markets and products is not strong. The systematicness of the financial system is the premise of the financial crisis.

Second, systemic financial crises often occur in countries and regions with high degree of marketization and internationalization of financial markets. Compared with the countries that have experienced the financial crisis mentioned above, the degree of marketization and internationalization of China's financial market is still very low. China's financial market is not only closed to international capital, but also closed to domestic private capital. The whole layout and development of China's financial market are basically in the hands of the government.

Third, systemic financial crises often occur when a large number of financial assets are seriously overvalued and have high liquidity. For example, after the sharp appreciation of the yen, almost all assets in Japan, from the yen to real estate to the stock market, were seriously overvalued in the late 1980 s, so the crisis and the overall asset value shrinkage were inevitable. Compared with developed countries, most assets of developing countries, including China's RMB, are undervalued. It can be said that the transformation of a country from underdeveloped to developed is a process of appreciation of its currency and other assets relative to those of other countries. At present, China is in this process. In addition, because China's financial industry has not yet entered the mixed operation, a market environment for a large number of different types of financial assets to be converted, realized and flowed in an instant has not yet formed. Moreover, since the RMB has not yet become a free currency and the capital account has not yet been opened, there is little chance and possibility for a large number of RMB and RMB assets to be instantly converted into cash.

Fourth, systemic financial crises often occur in countries with serious deficits and foreign debts, such as Argentina and other Latin American countries. Just like a tree loses its water, nutrients and balance, just like an enterprise, when a country's cash flow is cut off or turned negative, especially when it faces a huge financial and trade twin deficits, the crisis is inevitable. Because once the stock, foreign exchange, real estate or other financial asset markets have problems or plummeted, the government at this time is already stretched, unable to rob Peter to pay Paul to prevent a systemic financial crisis. Fortunately, since the reform and opening up, China's economy has developed rapidly. Generally speaking, the cash flow of fiscal revenue and expenditure and trade revenue and expenditure is not only positive, but also the balance is growing rapidly. This means that China has sufficient financial resources to deal with the problems in the local financial market. In fact, since the reform and opening up, the government and investors have been using the huge surplus generated by the real economy to pay the huge deficits of financial markets and institutions such as banks, stock markets, brokerages and futures markets.