Search

Begin New Search Topic Economy Political Geography China

291. Do Financing Biases Matter for the Chinese Economy?

Author:
Yasheng Huang
Publication Date:
07-2006
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
It is widely acknowledged that China’s financial system is deeply troubled. Its banks have very high nonperforming loan ratios and its stock market has lost 50 percent of its value since 2001 amidst a GDP growth rate averaging some 9 percent a year. Those facts about the accounting aspects of China’s financial system are becoming better known in the West. However, what has not been sufficiently highlighted is the precise effect of China’s dysfunctional financial system and its broader pattern of allocating resources—in favor of the state sector at the expense of the private sector—on the Chinese economy and society. Probably the only reason economists and business analysts have found it hard to reconcile the accounting aspects of China’s financial system with the performance aspects of the Chinese economy is that China’s GDP growth has been so impressive. Some experts (e.g., Rawski 2001,Young 2003) have argued that China’s economic performance has not been as impressive as the official statistics indicate. Their work in this area delves into rather specialized and arcane areas of Chinese methods of compiling and reporting data. While this work is analytically important and does resolve some of the puzzles of China’s rapid growth, it is very technical and difficult for nonspecialists to understand. Thus, it is unlikely to grab readers’ attention away from newspaper headlines touting the rise of China and the huge trade surpluses that country has accumulated.
Topic:
Economics, Finance, Economy, Banking, and Bias
Political Geography:
China and Asia

292. A Proposal to Privatize Chinese Enterprises and End Financial Repression

Author:
Deepak Lal
Publication Date:
07-2006
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
China’s remarkable economic performance during the last two decades has rightly been hailed as an economic miracle. In this article, I briefly summarize the sources of the miracle, outline the serious problems China still faces because of the continuing financial repression necessitated by its unreformed and inefficient state-owned enterprises (SOEs), and provide a possible solution based on an efficient use of China’s burgeoning foreign exchange resources.
Topic:
Privatization, Finance, Economy, and State-Owned Enterprises
Political Geography:
China and Asia

293. Global Imbalances and Financial Reform with Examples from China

Author:
Raghuram G. Rajan
Publication Date:
07-2006
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
I will focus on a familiar issue, the problem of global current account imbalances, and will describe how financial sector reform can help narrow them, using examples from China. The United States is running a current account deficit approaching 6.25 percent of its GDP and over 1.5 percent of world GDP. To help finance it, the United States pulls in 70 percent of all global capital flows. Clearly, such a large deficit is unsustainable in the long run. The current situation has its roots in a series of crises over the last decade that were caused by excessive investment, such as the Japanese asset bubble, the crises in emerging markets in Asia and Latin America, and most recently, the IT bubble. Investment has fallen off sharply since, with only very cautious recovery. This is particularly true of emerging Asia and Japan. The policy response to the slowdown in investment has differed across countries. In the industrial countries, accommodative policies such as expansionary budgets and low interest rates have led to consumption- or credit-fueled growth, particularly in Anglo-Saxon countries. Government savings have fallen, especially in the United States and Japan, and household savings have virtually disappeared in some countries with housing booms. By contrast, the crises were a wake-up call in a number of emerging market countries. Historically lax policies have been tightened, with some countries running primary fiscal surpluses for the first time, and most bringing down inflation through tight monetary policy. With corporations cautious, and governments abandoning the grandiose projects of the past, investment has fallen off. Instead, exports have led growth. Many emerging markets have run current account surpluses for the first time. In emerging Asia, a corollary has been a buildup of international reserves.
Topic:
Financial Crisis, Reform, Finance, Economy, and Deficit
Political Geography:
China, Asia, North America, and United States of America