Social Sciences in China (Chinese Edition)

No.7, 2018

The Relationship between Asset Shortage and the Virtual and the Real Economy: A Regional Viewpoint

(Abstract)

Yang Shenggang and Yang Yang

The asset shortage has uncoupled the virtual economy from the real economy and the coexistence of asset shortages and leaving the real for the virtual economy has become a feature of the Chinese economy. Taking our sample from provincial panel data from 2001 to 2014, we verify the internal correlation between the asset shortage and the real economy. Our finding shows that there is a significant negative correlation between regional asset shortages and the development of the real economy with a regionally heterogeneous impact. Long-term asset shortage has made social capital leave the real for the virtual economy. Hence government should incorporate financial stability into the framework of monetary policy formulation and prudential supervision and increase the effective supply of financial assets to achieve symbiosis and synchronous prosperity for the virtual and the real economy.