Forestalling major financial risks is the first of the three critical battles against poverty, and deleveraging is one of the five main lines of supply-side structural reform. Since the beginning of this year, the policy tightening of financial supervision has caused large fluctuations in the financial market, and has triggered the dispute on deleveraging path. Recently, Xu Zhong, Director of the Research Bureau of the People's Bank of China, pointed out that the defects of fiscal and tax system are the main reasons for the government’s implicit debt, the high leverage of state-owned enterprises and the rapid rise of the household leverage ratio dominated by mortgage loans. Fiscal policy should play the core function of structural adjustment in the deleveraging process. Chief Gao Shanwen put forward the distinction between fiscal deleveraging and financial deleveraging, who believes that China's high leverage is a financial problem on the surface but a fiscal problem in essence. The financial tightening caused by strict supervision policies is to follow the path of financial deleveraging in terms of total volume, which is not a reasonable choice at present. It should return to the path of fiscal deleveraging since 2014.The author believes that the essence of China's "deleveraging" is to solve the problem of inefficient investment, which needs to solve many institutional structural problems, but this task is too heavy to bear for the government.
