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721. Renminbi Controversies

Author:
Morris Goldstein
Publication Date:
07-2006
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
No topic in international monetary economics has probably been more debated over the past three years than what should be done about China’s currency regime and about the exchange rate for the renminbi (RMB). In this article, I take up three questions that are at the center of the current debate, namely: (1) Is the RMB undervalued and, if so, by how much? (2) Would an RMB appreciation of 20–25 percent be particularly harmful for China’s economic growth and development, as well as for its domestic financial stability? (3) Was the July 21, 2005, currency reform a large or tiny step forward?1
Topic:
Economics, Economic Growth, Currency, and Financial Stability
Political Geography:
China and Asia

722. Five Persistent Myths About China's Banking System

Author:
Jonathan Anderson
Publication Date:
07-2006
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Of all the various topics and issues facing observers of the Chinese economy, it is safe to say that none arouses more spirited debate than the role of the financial system, and in particular the state of Chinese banks. Is the mainland on the verge of a financial crisis? Has the recent economic overheating created a new flood of bad loans? Do banks know how to allocate capital, or are they simply quasi-fiscal agencies acting at the mercy of the government? And does the rapidly opening financial system represent a gold mine or a “black hole” for foreign investors? The answers to these questions are not always straightforward, but in our experience the truth lies very much away from the extremes so often presented in the financial press. Chinese banks are by no means “out of the woods,” first and foremost because they remain stateowned institutions, but they are now well advanced from their situation only a decade ago. This means that the economy is protected from the risk of a financial crisis—but, on the other hand, the banking sector is more a sunset industry than an exciting growth sector. There are a number of myths about banks and the financial system in China but the following are the most important and most persistent: (1) China’s cost of capital is far too low; (2) Mainland banks are unreconstructed quasi-fiscal agencies; (3) Bank recapitalization is a sham; (4) Banks are already “out of the woods”; and (5) The Chinese banking system is an exciting growth industry. Let us now examine these five myths.
Topic:
Economics, Financial Crisis, Finance, Economic Growth, and Banking
Political Geography:
China and Asia

723. U.S. Trade Policy Toward China: Discrimination and its Implications

Author:
Rachel McCulloch and Chad P. Bown
Publication Date:
06-2005
Content Type:
Working Paper
Institution:
The Brookings Institution
Abstract:
The bilateral relationship with China has become a major focus of U.S. trade policy. This paper examines recent U.S. policy toward imports from China, highlighting important explicitly and implicitly discriminatory elements. Discriminatory restrictions on U.S. trade with China protect competing domestic industries as well as non-Chinese foreign suppliers with an established presence in the U.S. market. Unlike discriminatory U.S. treatment of Japan in the 1980s, in which "gray-area" measures like voluntary export restraints were prominent, most U.S. actions toward China are fully consistent with current WTO rules, including the special terms of China's 2001 WTO accession. However, as with earlier discriminatory actions directed primarily at Japan, U.S. trade policy toward China is likely to have complex effects on global trade flows and may produce outcomes far different from those intended.
Topic:
Economics and International Trade and Finance
Political Geography:
United States, China, and Asia

724. China's Currency: Not the Problem

Author:
Albert Keidel
Publication Date:
06-2005
Content Type:
Policy Brief
Institution:
Carnegie Endowment for International Peace
Abstract:
In Washington, politicians and pundits have settled on a single magical solution for the country's economic ills: getting China to revalue its currency, the RMB. By any reasonable economic measure, however, the RMB is not undervalued. China does have a trade surplus with the United States, but it has a trade deficit with the rest of the world. And China's accumulation of dollar reserves is not the result of trade surpluses, but of large investment inflows caused in part by speculators' betting that China will yield to U.S. pressure. Focusing on China's currency is a distraction. If the United States wants to improve its economy for the long haul, it had best look elsewhere beginning with raising the productivity of American workers.
Topic:
Economics and Government
Political Geography:
United States, China, America, Washington, and Asia

725. Prospects for Regional Free Trade in Asia

Author:
Gary Clyde Hufbauer and Yee Wong
Publication Date:
10-2005
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Frustrated with lackluster momentum in the WTO Doha Round and the Asia Pacific Economic Cooperation (APEC) forum, and mindful of free trade agreement (FTA) networks centered on the United States and Europe, Asian countries have joined the FTA game. By 2005, Asian countries (excluding China) had ratified 14 bilateral and regional FTAs and had negotiated but not implemented another seven. Asian nations are also actively negotiating some 23 bilateral and regional FTAs, many with non-Asian partners, including Australia, Canada, Chile, the European Union, India, and Qatar. China has been particularly active since 2000. It has completed three bilateral FTAs—Thailand in 2003 and Hong Kong and Macao in 2004—and is initiating another 17 bilateral and regional FTAs. However, a regional Asian economic bloc led by China seems distant, even though China accounts for about 30 percent of regional GDP. As in Europe and the Western Hemisphere, many Asian countries are pursuing FTAs with countries outside the region. On present evidence, the FTA process embraced with some enthusiasm in Asia, Europe, and the Western Hemisphere more closely resembles fingers reaching idiosycratically around the globe rather than politico-economic blocs centered respectively on Beijing, Brussels, and Washington.
Topic:
Economics, International Trade and Finance, and Regional Cooperation
Political Geography:
United States, China, Europe, Washington, Canada, India, Beijing, Asia, Australia, Qatar, Chile, Hong Kong, Brussels, and Macao

726. What Might the Next Emerging-Market Financial Crisis Look Like?

Author:
Morris Goldstein and Anna Wong
Publication Date:
07-2005
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
This paper addresses the following question: If a financial crisis affecting a group of emerging economies were to take place sometime over the next three years, where would the crisis likely originate, how could it be transmitted to other economies, and which economies would be most affected by particular transmission or contagion mechanisms? A set of indicators is presented to gauge the vulnerability of individual emerging economies to various shocks, including a slowdown in import demand in both China and the United States, a fall in primary commodity prices, increased costs and lower availability of external financing, alternative patterns of exchange rate changes, and pressures operating on monetary and fiscal policies in emerging economies.
Topic:
Economics, Emerging Markets, Globalization, and International Trade and Finance
Political Geography:
United States and China

727. The Chinese Economy: Prospects and Key Policy Issues

Author:
Morris Goldstein
Publication Date:
04-2005
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
No abstract is available.
Topic:
Economics, Industrial Policy, and International Trade and Finance
Political Geography:
China and Asia

728. Global Economic Prospects: Slower But Still Solid Growth in 2005; Worries About Growth and Inflation for 2006

Author:
Michael Mussa
Publication Date:
04-2005
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
After surging to the highest growth rate in a generation, world real GDP is set to slow from a rate of just over 5 percent for 2004 to about 4 percent for 2005 and a tad slower for 2006. The economic slowdowns in several important economies in the second half of last year, including much of continental Europe and Japan, already make it clear that year-over-year growth will slow for 2005. But the continued strong growth of domestic demand in other countries, most notably the United States and China, virtually assures that global growth this year will not fall below potential.
Topic:
Economics and International Trade and Finance
Political Geography:
United States, Japan, China, Europe, Israel, and East Asia

729. China's Role in the Revived Bretton Woods System: A Case of Mistaken Identity

Author:
Nicholas R. Lardy and Morris Goldstein
Publication Date:
03-2005
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
According to a popular argument put forward by three Deutsche Bank economists (Dooley, Folkerts-Landau, and Garber, here after DFG), one needn't worry about the sustainability of either the large US current account deficit or the undervalued exchange rates of a group of Asian economies (Dooley, Folkerts-Landau, and Garber 2003, 2004a, 2004b, 2004c; Folkerts-Landau 2004). In their view, the United States and the Asian economies have entered into an implicit contract—the so-called revived Bretton Woods system (hereafter BW2)—that can comfortably carry on for another decade or two, with significant net benefits to both parties.
Topic:
Economics and International Trade and Finance
Political Geography:
United States, China, and Asia

730. China and the World Economy Workshop. Conference Summary

Author:
Robert Kapp
Publication Date:
12-2005
Content Type:
Policy Brief
Institution:
Atlantic Council
Abstract:
Peter Bottelier, the principal presenter of this topic, opened by noting that much discussion now surrounds the evolving “new line” embodied in China's economic plans for the next five years. The three agricultural questions, self-innovation, regional adjustment, opening up of a win-win “harmonious society,” and economizing on energy use: what do these and other much-discussed new terms really mean?
Topic:
Economics, Globalization, and International Trade and Finance
Political Geography:
China and Asia