China National Balance Sheet Report 2020 was released in Beijing in late February.

Compiling two decades of China’s national balance sheet data between 2000 and 2019, the report provides detailed data samples that can be used to comprehensively analyze China’s development and make international comparisons.

Xie Fuzhan, president of the Chinese Academy of Social Sciences (CASS), said that the national balance sheet is the country’s major account book, shedding light on the country’s overall economic situation. The national balance sheet provides a more comprehensive perspective for assessing a country’s debt risk while providing a more reliable statistical basis for measuring comprehensive national strength.

National wealth is the total wealth of three main entities: residents, enterprises, and the government. The wealth of each entity is the total of its non-financial assets and net financial assets, which is the difference between all assets and all liabilities.

China’s wealth accumulation was expected to exceed 700 trillion in 2020, which is much higher than the country’s GDP, said Zhang Xiaojing, director of the Institute of Finance and Banking at CASS. Between 2000 and 2019, the compound annual growth rate of China’s social net wealth is 16.2%, while that of the nominal GDP is 12.8%. The growth rate of wealth is much faster than the growth rate of nominal GDP, let alone that of real GDP.

National wealth is the core indicator of a country’s balance sheet, and it is more suitable than GDP to reflect a country’s economic strength, said Xu Xianchun, former deputy director of the National Bureau of Statistics. National wealth’s distribution structure not only includes the distribution structure of national wealth among residents, enterprises, and the government, but also distribution structures within the residential sector, within the corporate sector, and within the government sector. When compared to the national income distribution structure, the distribution structure of national wealth can better reflect the actual distribution of resources in different sectors.

The national balance sheet is not only an account system, but also an economic analysis method, from which new discoveries can be made, said Li Yang, former CASS vice president. After applying financial analysis, one can distinguish various financial risks such as maturity mismatches, currency mismatches, capital structure mismatches, and a lack of solvency, so as to deepen the understanding of the financial crisis and find more practical countermeasures.

Li further pointed out that based on the balance sheet, one can see that China’s debt growth has generated a lot of valuable assets, and the income of these assets can completely cover the debt. In addition, based on the balance sheet, it is also possible to analyze the size and distribution of Chinese society’s net wealth. Comparative research shows that the current net wealth controlled by the Chinese government exceeds that of the United States, which gives China more space and resilience to deal with various shocks.

The national balance sheet provides a perspective for observing the economy and society, said Liu Shangxi, president of the Chinese Academy of Fiscal Sciences. Concepts such as GDP, investment, consumption, and savings are under the umbrella of economic flows, which reflect changes in economic stock, such as the appreciation, impairment, and form transformation of economic stock.

If one observes the economy and society from the perspective of economic stock, one can unify the concepts of income, expenditure, savings, consumption, investment, finance, and the real economy, and put the macro, micro, and seemingly opposite elements into a more general framework for understanding, Liu continued. It not only helps analysts observe economic issues, but also provides an important perspective for studying financial issues, social issues, government issues, and fiscal issues.

For future follow-up research, Fan Gang, president of the China Development Institute, suggested that assets’ changing prices can be considered from the perspective of assets. Changes in asset prices include two parts, one being savings and investment, and the other being price premiums. In the future, it is necessary to distinguish clearly whether assets are formed by actual investment or asset premiums.

Zhang suggested optimizing the allocation of stock assets, including optimizing allocations between the government and residents.

Xu noted that the distribution structure of national income, to a large extent, determines the distribution structure of national savings, which in turn largely determines the distribution structure of the increase in national wealth. As such, the distribution structure of national income has an important influence on the distribution structure of national wealth increments. In order to maintain a reasonable national wealth distribution structure, a reasonable national income distribution structure must also be maintained.