Financial Repression and China’s Economic Imbalances
AbstractIncreasing domestic and external imbalances pose a serious challenge to economic development in China. While several forms of economic imbalances have been identified and discussed, many of these imbalances represent symptoms rather than the main issues that Chinese policymakers have to deal with in order to sustain economic growth over the next decade. Building on recent research on the relationship between financial repression and economic imbalances, the main premise of this paper is that financial repression in China has been at least partly responsible for extremely high levels of investments, a very strong industrial sector and a weakly developed service sector, serious external imbalances and rising inequality. This paper discusses how the Chinese government has used repressive financial policies since the beginning of the reforms, how these policies have resulted in economic imbalances, and some initial suggestions on financial reforms that would help in the pursuit of rebalancing the Chinese economy.
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Bibliographic InfoPaper provided by China Economic Research Center, Stockholm School of Economics in its series Working Paper Series with number 2012-22.
Length: 31 pages
Date of creation: 27 Apr 2012
Date of revision:
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Postal: China, Economic Research Center, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Phone: +46-8-736 90 00
Fax: +46-8-31 81 86
Web page: http://www.hhs.se/CERC/
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Financial repression; Structural imbalances; External imbalances; Inequality; Financial liberalization; Financial reform; China;
Find related papers by JEL classification:
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-08 (All new papers)
- NEP-FDG-2012-05-08 (Financial Development & Growth)
- NEP-TRA-2012-05-08 (Transition Economics)
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- Juan Marchetti & Michele Ruta & Robert Teh, 2012. "Trade Imbalances and Multilateral Trade Cooperation," CESifo Working Paper Series 4050, CESifo Group Munich.
- Johansson, Anders C. & Wang, Xun, 2012. "Financial Sector Policies, Poverty and Inequality," Working Paper Series 2012-24, China Economic Research Center, Stockholm School of Economics.
- Veasna Kong & Adam McKissack & Dong Zhang, 2012. "China in a new period of transition," Economic Roundup, Treasury, Australian Government, issue 4, pages 42-62, December.
- Johansson, Anders C. & Feng, Xunan, 2013. "The State Advances, the Private Sector Retreats: Firm Effects of China’s Great Stimulus Program," Working Paper Series 2013-25, Stockholm China Economic Research Institute, Stockholm School of Economics.
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