Abstract:

While the debt problem has not been completely resolved， China’s economy is still facing structural imbalance and slowing growth. The pressure from high debt and low growth rate forces the need for further in-depth research on the intrinsic relationship between these two matters. The analysis of the dynamic general equilibrium model shows that debt optimizes the allocation of financial resources among participants with different production efficiencies and promotes capital accumulation/output. Social welfare is thus improved. Under the condition of compulsory repayment， the production equilibrium condition determines the upper limit of debt， while non-mandatory repayment， the not-too-tight debt ceiling and the production equilibrium condition jointly do. Numerical simulation shows that there is a robust positive U-shaped relationship between debt-to-capital ratio and capital stock. At present， China's nonfinancial corporate debt-to-capital ratio is 33.9%， which is higher than the optimal level in history， so policymakers should adhere to deleveraging. But the problem of resource misallocation needs more attention.

Key words: nonfinancial corporate debt, the search theory, credit constraint, leverage rate