Economics, Politics and Public Policy in East Asia and the Pacific
Author: Yu Yongding, CASS
After the Chinese government launched its so-called Pilot RMB Trade Settlement Scheme in April 2009, efforts to internationalise the renminbi have made impressive headway.
By September 2011, RMB deposits in Hong Kong reached RMB622.2 billion, and it was widely expected that the amount would surpass RMB1 trillion by the end of 2011. Things turned out otherwise. Read more…
Author: Yu Yongding, CASS, Beijing
Undoubtedly the most important impact of the global financial crisis (GFC) on the Chinese economy came from the fall in global demand, reflecting China’s extremely high export dependency.
China’s export to GDP ratio in 2007 was 35 per cent. Compared with a growth rate of 25 per cent in September, exports shrank by 2.2 per cent in November. This fall in exports may have cut GDP growth by 3 per cent. If its indirect impact is included, it may have shaved more than 5 per cent off China’s 2008 growth rate.
China’s high export dependency is a result of its export promotion policy. But from a macroeconomic perspective, China’s high export dependency is partly attributable to overcapacity caused by over-investment. In 2007, the combined contribution of fixed asset investment (FAI) and net exports to GDP growth was more than 60 per cent. FAI and exports are the engine-room of Chinese growth. Read more…
Author: Yu Yongding
China is deeply entangled in the global financial crisis, and will inevitably suffer heavy losses.
China’s foreign exchange currency reserve has reached about $US 2 trillion, and yet grows by some $300 billion every year.
With the worsening of the US financial crisis, the security of China’s foreign exchange reserve is facing increasingly serious pressures. Undoubtedly China must achieve a more reasonable balance of trade as soon as possible, and that objective is an integral part of the eleventh ‘Five-year Plan’. But if China cannot adequately reduce its current account and capital account surpluses over the short to medium term, then it must find some other way to guarantee the security, liquidity, and profit of its current foreign exchange reserve.
Issuing panda bonds may be a way out