Reports

03.29.13

China’s Path to Consumer-Based Growth

Il Houng Lee, Murtaza Syed, Liu Xueyan
Luo Xiaoyuan
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...

Reports

03.28.13

China’s Demography and its Implications

Il Houng Lee, Xu Qingjun, Murtaza Syed
Luo Xiaoyuan
International Monetary Fund (IMF)
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...

Reports

03.27.13

How Effective are Macroprudential Policies in China?

Bin Wang, Tao Sun
Luo Xiaoyuan
International Monetary Fund (IMF)
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...

Reports

11.27.12

Is China Over-Investing and Does it Matter?

Il Houng Lee, Murtaza Syed, Liu Xueyan
Luo Xiaoyuan
International Monetary Fund (IMF)
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,...

Reports

11.06.12

Investment-Led Growth in China: Global Spillovers

Ashvin Ahuja, Malhar Nabar
Luo Xiaoyuan
International Monetary Fund (IMF)
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...

Reports

11.05.12

The Spillover Effects of a Downturn in China’s Real Estate Investment

Ashvin Ahuja, Alla Myrvoda
Luo Xiaoyuan
International Monetary Fund (IMF)
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...

Reports

05.01.12

RMB Internationalization: Onshore/Offshore Links

Samar Maziad, Joong Shik Kang
Luo Xiaoyuan
International Monetary Fund (IMF)
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...

Reports

05.01.12

China’s Impact on World Commodity Markets

Shaun K. Roache
Luo Xiaoyuan
International Monetary Fund (IMF)
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...

Reports

09.28.11

Hong Kong’s Recovery from the Global Financial Crisis

International Monetary Fund (IMF)
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...

Reports

07.27.11

China’s Macroeconomic Rebalancing

International Monetary Fund (IMF)
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...

Reports

07.01.11

The External Impact of China’s Exchange Rate Policy: Evidence from Firm Level Data

Barry Eichengreen and Hui Tong
Sara Segal-Williams
International Monetary Fund (IMF)
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...

Reports

07.01.11

People’s Republic of China: Spillover Report for the 2011 Article IV Consultation and Selected Issues

International Monetary Fund (IMF)
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...

Reports

04.28.11

Identifying the Linkages Between Major Mining Commodity Prices and China’s Economic Growth—Implications for Latin America

Yongzhen Yu
International Monetary Fund (IMF)
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...

Reports

12.01.10

Transforming China: Insights from the Japanese Experience of the 1980s

Papa N'Diaye
Sara Segal-Williams
International Monetary Fund (IMF)
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...

Reports

12.01.10

Income Uncertainty and Household Savings in China

Marcos Chamon, Kai Liu, and Eswar Prasad
International Monetary Fund (IMF)
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...

Reports

11.05.10

Staff Report of the People’s Republic of China—Hong Kong Special Administrative Region: 2010 Article IV Consultation Discussions

International Monetary Fund (IMF)
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...

Reports

09.01.10

Price Dynamics in China

Nathan Porter
International Monetary Fund (IMF)
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...

Reports

07.01.10

People’s Republic of China: 2010 Article IV Consultation-Staff Report; Staff Statement; Public Information Notice on the Executive Board Discussion

International Monetary Fund (IMF)
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...

Reports

04.01.10

Determinants of China’s Private Consumption: An International Perspective

Kai Guo and Papa N'Diaye
International Monetary Fund (IMF)
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...

Reports

03.01.10

Public Expenditures on Social Programs and Household Consumption in China

Emanuele Baldacci, Giovanni Callegari, David Coady, Ding Ding, Manmohan Kumar, Pietro Tommasino, and Jaejoon Woo
International Monetary Fund (IMF)
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...

Reports

01.01.10

China: Does Government Health and Education Spending Boost Consumption?

Steven Barnett and Ray Brooks
International Monetary Fund (IMF)
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...

Reports

11.01.09

Governance and Fund Management in the Chinese Pension System

Gregoro Impavido, Yu-Wei Hu, and Xiaohong Li
International Monetary Fund (IMF)
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...

Reports

11.01.09

Macroeconomic Implications for Hong Kong SAR of Accommodative U.S. Monetary Policy

Papa N'Diaye
International Monetary Fund (IMF)
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...

Reports

09.01.09

What Drives China's Interbank Market?

Nathan Porter and TengTeng Xu
Sara Segal-Williams
International Monetary Fund (IMF)
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...

Reports

09.01.09

What’s the Damage? Medium-term Output Dynamics After Banking Crises

Abdul Abiad, Ravi Balakrishnan, Petya Koeva Brooks, Daniel Leigh, and Irina Tytell
International Monetary Fund (IMF)
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,...

Reports

07.01.09

Broad Money Demand and Asset Substitution in China

Ge Wu
International Monetary Fund (IMF)
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...

Reports

01.01.09

Yen Bloc or Yuan Bloc: An Analysis of Currency Arrangements in East Asia

Kazuko Shirono
Sara Segal-Williams
International Monetary Fund (IMF)
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...

Reports

12.01.08

Hong Kong SAR Economic Integration With the Pearl River Delta

Hongyi Chen and Olaf Unteroberdoerster
International Monetary Fund (IMF)
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...

Reports

12.01.08

The Impact of Introducing a Minimum Wage on Business Cycle Volatility: A Structural Analysis for Hong Kong SAR

Nathan Porter and Francis Vitek
Sara Segal-Williams
International Monetary Fund (IMF)
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...

Reports

12.01.08

The Macroeconomic Impact of Healthcare Financing Alternatives: Reform Options for Hong Kong SAR

Dennis Botman and Nathan Porter
International Monetary Fund (IMF)
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...

Reports

06.01.08

Why Are Saving Rates of Urban Households in China Rising?

Marcos Chamon and Eswar Prasad
International Monetary Fund (IMF)
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...

Reports

04.01.08

A Real Model of Transitional Growth and Competitiveness in China

Leslie Lipschitz, Céline Rochon, and Geneviève Verdier
International Monetary Fund (IMF)
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...

Reports

04.01.08

Real and Financial Sector Linkages in China and India

Jahangir Aziz
International Monetary Fund (IMF)
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...

Reports

03.01.08

Hong Kong SAR as a Financial Center for Asia: Trends and Implications

Cynthia Leung and Olaf Unteroberdoerster
International Monetary Fund (IMF)
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...

Reports

12.01.07

High Growth and Low Consumption in East Asia: How to Improve Welfare While Avoiding Financial Failures

Andrew Feltenstein, Céline Rochon, and Maral Shamloo
International Monetary Fund (IMF)
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...

Reports

11.01.07

China's Changing Trade Elasticities

Jahangir Aziz and Xiangming Li
International Monetary Fund (IMF)
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...

Reports

10.01.07

What Drives China’s Growing Role in Africa?

Jian-Ye Wang
Sara Segal-Williams
International Monetary Fund (IMF)
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...

Reports

09.01.07

The Shifting Structure of China's Trade and Production

Li Cui and Murtaza Syed
International Monetary Fund (IMF)
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...

Reports

07.01.07

Explaining China's Low Consumption: The Neglected Role of Household Income

Jahangir Aziz and Li Cui
International Monetary Fund (IMF)
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...

Reports

07.01.07

Guarding Against Fiscal Risks in Hong Kong SAR

Nathan Porter
International Monetary Fund (IMF)
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...

Reports

05.01.07

Pension Reform in China: The Need for a New Approach

Steven Dunaway and Vivek Arora
International Monetary Fund (IMF)
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...

Reports

01.01.07

China: Strengthening Monetary Policy Implementation

Bernard J. Laurens and Rodolfo Maino
International Monetary Fund (IMF)
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...

Reports

01.01.07

Das (Wasted) Kapital: Firm Ownership and Investment Efficiency in China

David Dollar and Shang-Jin Wei
International Monetary Fund (IMF)
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...

Reports

12.01.06

The Rise of Foreign Investments in Chinese Banks—Taking Stock

Lamin Leigh and Richard Podpiera
International Monetary Fund (IMF)
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...

Reports

12.01.06

Rebalancing China's Economy: What Does Growth Theory Tell Us?

Jahangir Aziz
Sara Segal-Williams
International Monetary Fund (IMF)
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...

Reports

11.01.06

What’s Driving Investment in China?

Steven Barnett and Ray Brooks
Sara Segal-Williams
International Monetary Fund (IMF)
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,...

Reports

11.01.06

Can Good Events Lead to Bad Outcomes? Endogenous Banking Crises and Fiscal Policy Responses

Andrew Feltenstein and Céline Rochon
International Monetary Fund (IMF)
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...

Reports

10.01.06

How Robust Are Estimates of Equilibrium Real Exchange Rates: The Case of China

Steven Dunaway, Lamin Leigh, and Xiangming Li
International Monetary Fund (IMF)
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...

Reports

05.01.06

A Framework for Independent Monetary Policy in China

Marvin Goodfriend and Eswar Prasad
International Monetary Fund (IMF)
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...

Reports

03.01.06

Progress in China's Banking Sector Reform: Has China's Bank Behavior Changed?

Richard Podpiera
Sara Segal-Williams
International Monetary Fund (IMF)
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...

Reports

02.01.06

Does Inflation in China Affect the United States and Japan?

Tarhan Feyzioglu and Luke Willard
International Monetary Fund (IMF)
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...

Reports

01.31.06

The Dynamics of Provincial Growth in China: A Nonparametric Approach

Bulent Unel and Harm Zebregs
International Monetary Fund (IMF)
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...

Reports

01.01.06

Seasonalities in China's Stock Markets: Cultural or Structural?

Jason D. Mitchell and Li Lian Ong
Sara Segal-Williams
International Monetary Fund (IMF)
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...