Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. In this report, "$" refers to US dollars, unless otherwise stated.The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of ADBI, ADB, its board of directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, Japan AbstractDespite the increasing recognition that the renminbi (RMB) may eventually become a key global currency, several important questions remain to be answered. This paper analyzes the benefits and costs of the RMB becoming an international currency. The benefits include reduced exchange risk, promotion of the development of the financial market, and expansion of firms in the People's Republic of China. The costs include general costs, which complicate monetary policy and exchange rate policy, and several transitional risks. We argue that the benefits of RMB internationalization should surpass its costs, particularly in the long run, and provide comprehensive policy choices for a sustainable process of RMB internationalization. JEL Classification: F42, F31, F36 ADBI Working Paper 481Zhang and Tao
China's large current account surpluses not only destabilize its own macroeconomic conditions, but are also a focal point for global rebalancing discussions. Existing explanations by the literature fail either to account for the recent surge or to offer actionablepolicy responses. In this study, we propose an alternative hypothesis: asymmetric market liberalization and associated cost distortions. These distortions are producer subsidy equivalents, which contributed to both extraordinary growth performance and the growing structural imbalances. Our rough estimates of such factor cost distortions offer some explanations for recent movements of the current account. We argue that China needs to adopt a comprehensive reform package to rebalance its economy. (c) 2010 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.
Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. This paper is the final version of the output of the joint research project on "Trans-Pacific Rebalancing" by the Asian Development Bank Institute (ADBI) and the Brookings Institution and was presented at a project workshop in Tokyo on 3-4 March 2010. A revised version of the paper was also discussed at the "Asian Economic Panel" meeting in Incheon on 22-23 March 2010. We wish to thank our discussants Shin-ichi Fukada, Liqing Zhang, Bhnupong Nidhiprabha, and Yonghyup Oh for detailed comments on the paper. Barry Bosworth, Masahiro Kawai, Harry Wu, Wing Thye Woo, JoonKyuang Ha, Chalongphob Sussangkarn, Frederick Sjoholm, Ligang Liu, John Knight, Don Hanna, and Premchandra Athukorala also provided useful comments. We also wish to thank the ADBI, the China Center for Economic Research at Peking University, and the China Economy and Business Program at the Australian National University for support at various stages of this research.Huang is professor of economics at the China Center for Economic Research of Peking University. He also holds the Rio Tinto Chair in the Chinese Economy at the Crawford School of Economics and Government of Australian National University.The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of ADBI, the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, JapanTel:+81-3-3593-5500 Fax:+81-3-3593-5571 URL:www.adbi.org E-mail: info@adbi.org AbstractThe current account surplus of the People's Republic of China (PRC) has drawn much foreign and domestic attention. This paper focuses on the reasons and remedies for the PRC's current account su...
The rapid internationalization of the RMB since 2009 raises many interesting questions, including: Why has this change been so fast? What is the rationality behind this new process? What economic consequences will it produce? What kinds of policies should China adopt to make the process smooth and sustainable? In this paper, we first describe the main developments of RMB internationalization and discuss the rationality of the process, by comparing its benefits and costs. Then, based on the historical experience of the main international currencies, we use a Size-Liquidity-Credibility analytical framework for understanding the determinants of being an international currency. Using this framework, we then provide some policy suggestions for making RMB internationalization a sustainable process.
Strong credit expansion in China after the recent global financial crisis has brought local government financial vehicles (LGFV) into the spotlight. Rapid growth of LGFV has triggered concern about local government indebtedness, banks ' asset quality and, more broadly, China's medium-term financial stability and sovereign risk. This paper constructs a unique firm-level dataset to evaluate the country's local government debt. We find an uneven distribution of LGFV, which are concentrated in the coastal areas, and a deterioration of their debt repaying ability from 2010 to 2012. We use principal component analysis (PCA) along with multivariate discriminate analysis (MDA) to identify the credit risk of LGFV based on conventional financial variables as well as local governments ' fiscal status. We also estimate the safe boundaries of debt bearing at the provincial government level. The estimations reveal more severe local government debt risks in the middle-western provinces and higher risks associated with LGFV at the municipal and county levels. Although it is very unlikely that there will be a national debt crisis in China, the high risk of LGFV should be noted and effectively controlled by improving the fiscal transparency of local governments and reforming the fiscal system.
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