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The International Financial Integration of China and India

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Author Info
Lane, Philip R.
Schmukler, Sergio

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Abstract

Three main features characterize the international financial integration of China and India. First, while only having a small global share of privately-held external assets and liabilities (with the exception of China’s FDI liabilities), these countries are large holders of official reserves. Second, their international balance sheets are highly asymmetric: both are “short equity, long debt.” Third, China and India have improved their net external positions over the last decade although, based on their income level, neoclassical models would predict them to be net borrowers. Domestic financial developments and policies seem essential in understanding these patterns of integration. These include financial liberalization and exchange rate policies; domestic financial sector policies; and the impact of financial reform on savings and investment rates. Changes in these factors will affect the international financial integration of China and India (through shifts in capital flows and asset/liability holdings) and, consequently, the international financial system.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5852.

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Date of creation: Sep 2006
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Handle: RePEc:cpr:ceprdp:5852

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Keywords: capital flows China financial integration India world economy

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Find related papers by JEL classification:
F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
F30 - International Economics - - International Finance - - - General
F31 - International Economics - - International Finance - - - Foreign Exchange
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Eswar S. Prasad, 2007. "Is the Chinese Growth Miracle Built to Last?," IZA Discussion Papers 2995, Institute for the Study of Labor (IZA). [Downloadable!]
  2. Maurice Obstfeld, 2007. "The Renminbifs Dollar Peg at the Crossroads," IMES Discussion Paper Series 07-E-11, Institute for Monetary and Economic Studies, Bank of Japan. [Downloadable!]
    Other versions:
  3. Céline Rochon & Maral Shamloo & Andrew Feltenstein, 2007. "High Growth and Low Consumption in East Asia: How to Improve Welfare While Avoiding Financial Failures," IMF Working Papers 07/278, International Monetary Fund. [Downloadable!]
  4. Lane, Philip R., 2006. "The Swedish External Position and the Krona," Working Paper Series 200, Sveriges Riksbank (Central Bank of Sweden). [Downloadable!]
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