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Lessons for China from financial liberalization in Scandinavia

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  • Hongyi Chen
  • Lars Jonung
  • Olaf Unteroberdoerster

Abstract

This study brings out policy lessons for China today, a financially repressed country, from the financial liberalization process in Denmakr, Finland, Norway and Sweden in the 1980s and early 1990s. This report identifies a set of policy lessons for China today from the experience of financial deregulation, financial crisis and recovery in Scandinavia during the period 1985-2000. Although there are considerable differences between the huge Chinese economy and the small Nordic countries, there are enough similarities to make lesson-drawing a worthwhile exercise. Based on the Scandinavian experience and the added complexity of China's status as a transition economy, financial reforms should strike a proper balance between being gradual (to avoid costly mistakes) and substantive (to secure efficiency gains in the longer term) with due consideration being given to initial conditions concerning regulation, taxes and exchange rate arrangements. A well managed process of financial deregulation requires that policy-makers and market participants fully understand the interlinkages between financial reforms and the rest of the economy. In addition, the supervisory and management systems in the financial sector should move in step with the liberalization process.

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Bibliographic Info

Paper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 383.

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Length: 58 pages
Date of creation: Aug 2009
Date of revision:
Handle: RePEc:euf:ecopap:0383

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Keywords: Financial liberalization; financial crisis; transition; financial regulation; banking; boom-bust; China; Scandinavia; the Nordics;

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Cited by:
  1. Vivek Arora & Karl Habermeier & Jonathan D. Ostry & Rhoda Weeks-Brown, 2013. "La liberalización y el manejo de los flujos de capital: una visión institucional," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 15(28), pages 205-255, January-J.
  2. Yu-Wei Hu, 2010. "Management of China's foreign exchange reserves: a case study on the state administration of foreign," European Economy - Economic Papers 421, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  3. Jonung, Lars, 2009. "Financial Crisis and Crisis Management in Sweden. Lessons for Today," ADBI Working Papers 165, Asian Development Bank Institute.

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