International Monetary Fund (IMF)

This paper proposes a possible framework for identifying excessive investment. Based on this method, it finds evidence that some types of investment are becoming excessive in China, particularly in inland provinces. In these regions, private...

In coming decades, China will undergo a notable demographic transformation, with its old-age dependency ratio doubling to 24 percent by 2030 and rising even more precipitously thereafter. This paper uses the permanent income hypothesis to reassess...

This paper investigates macroprudential policies and their role in containing systemic risk in China. It shows that China faces systemic risk in both the time (procyclicality) and cross-sectional (contagion) dimensions. The former is reflected as...

Now close to 50 percent of GDP, this paper assesses the appropriateness of China’s current investment levels. It finds that China’s capital-to-output ratio is within the range of other emerging markets, but its economic growth rates stand out,...

Over the past decade, China’s growth model has become more reliant on investment and its footprint in global imports has widened substantially. Several economies within China’s supply chain are increasingly exposed to its investment-led growth and...

Real estate investment accounts for a quarter of total fixed asset investment (FAI) in China. The real estate sector’s extensive industrial and financial linkages make it a special type of economic activity, especially where the credit creation...

Among emerging market currencies, the RMB holds the most potential to become widely used internationally, due to China‘s large economic size, diversified trade structure and network, macroeconomic stability, and high growth rates - both current and...

Shocks to aggregate activity in China have a significant and persistent short-run impact on the price of oil and some base metals. In contrast, shocks to apparent commodity-specific consumption (in part reflecting inventory demand) have no effect on...

Hong Kong’s economy was severely affected by the global financial crisis (through both trade and financial channels). A recovery is now underway, fueled by growth on the Mainland, supportive policies, and accommodative monetary conditions imported...

In May and June 2011, an International Monetary Fund staff team held discussions in Chengdu, Shanghai, and Beijing, which this report documents. The consultation examined China’s macroeconomic outlook, the potential for a property price bubble, the...

The authors examine the impact of renminbi revaluation on foreign firm valuations, considering two surprise announcements of changes in China’s exchange rate policy in 2005 and 2010 and employing data on some 6,000 firms in forty-four economies...

This report discusses the outward effects of China’s economic policies on the rest of the world. The report does not try to capture the full extent and historical significance of China’s new influence on the world economy. Rather, it focuses on a...

Major mining commodity prices are inherently volatile and cyclical. High levels of investment in China have been a key driver in the strong world demand for minerals and metals over the past decade. The urbanization and industrialization of China...

China is poised on the brink of a transition to a service-based economy. The Japanese experience of the 1980s provides several insights about the way to manage such a transition and the downsides to avoid. In particular Japan offers useful insights...

China’s household saving rate has increased markedly since the mid-1990s and the age-savings profile has become U-shaped. The authors find that rising income uncertainty and pension reforms help explain both of these phenomena. Using a panel of...

Two potent forces continue to influence Hong Kong SAR's prospects: the unprecedented monetary policy easing in the United States and the solid domestic recovery, in part driven by spillovers from the Mainland. While the substantial expansion of...

Chinese inflation, particularly non-food inflation, has been surprisingly modest in recent years. The author finds that supply factors, including those captured through upstream foreign commodity and producer prices, have been important drivers of...

This is the staff report for the 2010 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on July 1, 2010, with the officials of the People's Republic of China on economic developments and policies...

Gauges the key determinants of China's private consumption in relation to GDP using data on the Chinese economy and evidence from other countries' experiences. The results suggest there is nothing "special" about consumption in...

This paper argues that increasing government social expenditures can make a substantive contribution to increasing household consumption in China. The paper first undertakes an empirical study of the relationship between the savings rate and social...

Consumption in China is unusually low and has continued to decline as a share of GDP over the past decade. A key policy question is how to reverse this trend, and rebalance growth away from reliance on exports and investment and toward consumption...

The Chinese pension system is highly fragmented and decentralized, with governance standards, pension fund management practices, their regulation and supervision varying considerably both across the funded components of the Chinese pension system...

This paper discusses the potential macroeconomic implications for Hong Kong SAR of accommodative monetary policy in the United States. It shows, through model simulations, that a resumption of the credit channel in Hong Kong SAR has the potential to...

Interest rates in China comprise a mix of both market determined interest rates (interbank rates and bond yields), and regulated interest rates (lending and deposit rates), reflecting China's gradual process of interest rate liberalization. We...

This paper investigates the medium-term behavior of output following banking crises, and its association with pre- and post-crisis conditions and policies. The authors find that output tends to be depressed substantially following banking crises,...

Recent changes to China's financial system, in particular ongoing interest rate liberalization, gradual movement toward a more flexible exchange rate regime, and rapid development of capital markets, have changed substantially the environment...

This paper examines the role of Japan against that of China in the exchange rate regime in East Asia in light of growing interest in forming a currency union in the region. The analysis suggests that currency unions with China tend to generate...

Hong Kong SAR's economic integration with the Mainland has primarily taken place in the Pearl River Delta (PRD). Taking stock of integration trends, this paper discusses key implications for ensuring economic benefits of further integration are...

We study the impact of a minimum wage on business cycle volatility, depending upon its coverage and adjustment mechanism. As with other small open economies, Hong Kong SAR is vulnerable to external shocks, with its exchange rate regime precluding...

With much healthcare publicly funded, Hong Kong's rapidly aging population will significantly raise fiscal pressure over coming decades. The authors ask what the implications are of meeting these costs by public funding, or private funding...

From 1995 to 2005, the average urban household saving rate in China rose by 7 percentage points, to ¼ of disposable income. The authors use household-level data to explain the postponing of consumption despite rapid income growth. Saving rates have...

The authors present a stylized real model of the Chinese economy with the objective of explaining two features: (1) domestic production is highly competitive in the sense that an accumulation of capital that raises the marginal product of labor...

In the spirit of what is known as business cycle accounting, this paper finds that the investment wedge—the gap between household rates of intertemporal substitution and the marginal product of capital—is large and quantitatively significant in...

We document Hong Kong SAR's evolving role as an international financial center in the Asia region, the importance of the growing special link with China as well as supply-side advantages, and outline the scope for future financial services...

This paper analyzes certain policies that are typical of a number of rapidly growing East Asian countries in which a fixed exchange rate, combined with a surplus labor market, has made domestic assets relatively inexpensive, generating high rates of...

In recent years, much has been written about the China's rising current account surplus and the importance of its exchange rate policy. At the same time, the increasing integration of China into the global economy has raised questions about how...

What role does China play in Africa’s development? What drives China’s increasing economic involvement in the continent? This paper attempts to provide a quantified assessment of China’s multifaceted influence as market, donor, financer and investor...

This paper uses disaggregated trade data to assess how the expansion of China's production capacity and its changing production structure may be affecting its trade linkages with other countries. It finds that China is moving away from...

The Chinese government has recently focused on the need to increase consumption to rebalance the economy. A widely held view is that despite China's remarkably high growth, the share of consumption in total expenditure has been low and...

The Hong Kong SAR's government faces the dual challenges of volatile revenue and medium term spending pressures arising from a rapidly aging population. Age-related spending pressures raise long-run sustainability concerns, while revenue...

The rapid aging of China's population over the next few decades makes it important for a new pension system with broad and adequate coverage to be put in place quickly. Pension reforms, first initiated in 1997, have become bogged down in...

The People's Bank of China (PBC) has made great strides in modernizing its monetary policy frameworks, but their effectiveness will diminish as the sophistication of the economy increases. Empirical evidence supports maintaining a reference to...

Based on a survey that covers a stratified random sample of 12,400 firms in 120 cities in China with firm-level accounting information for 2002-2004, the authors examine the presence of systematic distortions in capital allocation that result in...

The recent wave of foreign investment in China's banks and the prospects of further opening of the banking sector under the WTO agreement suggest that foreign banks are likely to play an increasingly important role in China. This paper takes...

This paper uses the standard one-sector neoclassical growth model to investigate why China's consumption has been low and investment high. It finds that the low cost of capital has been quantitatively an important factor. Theory predicts that...

Investment has grown rapidly in China in recent years, reaching more than 40 percent of GDP. Despite good progress on bank and enterprise reforms, weaknesses remain that could contribute to inefficient investment decisions. Manufacturing,...

A study of the impact of labor market restructuring and foreign direct investment on the banking sector, using a dynamic general equilibrium model with a financial sector. Numerical simulations are performed using stylized Chinese data, and bank...

Increased attention is being paid to assessments of the actual values of countries' real exchange rates relative to their "equilibrium" values as suggested by "fundamental" determining factors. This paper assesses the...

As China's economy becomes more market-based and continues its rapid integration into the global economy, having an independent and effective monetary policy regime oriented to domestic objectives will become increasingly important...

Substantial effort has been devoted to reforming China's banking system in recent years. The authorities recapitalized three large state-owned banks, introduced new governance structures, and brought in foreign strategic investors. However, it...

With China's share in global trade increasing rapidly, some argued in 2002-03 that China was exporting deflation to other countries as it was dumping cheap goods in mature markets. Later, others argued that China was sucking in commodities and...

China's growth record since the start of its economic reforms in 1978 has been extraordinary. Yet, this impressive performance has been associated with an increasing regional income disparity. The authors use a recently developed nonparametric...

In this paper, we examine returns in the Chinese A and B stock markets for evidence of calendar anomalies. We find that both cultural and structural (segmentation) factors play an important role in influencing the pricing of both A- and B-shares in...