Andrew Sheng (Tsinghua University) Allen Ng (Bank Negara Malaysia)
Abstract
International financial integration has accelerated at an unprecedented pace in recent years. External holdings of financial assets and liabilities for both industrial and emerging countries have grown rapidly since the mid-1990s, many times exceeding their respective national income, and traditional surveillance methods using flow data are increasingly incapable of satisfactorily explaining the recent major global economic developments. Using Lane and Milesi-Ferretti's (2006) rich data-set of external positions for 145 countries from 1970 to 2004, this paper selects several issues to highlight the usefulness of balance sheet analysis as a tool for historical understanding and to examine how it can help in an analysis of possible future vulnerabilities. Starting from a global overview, the study looks at China from a comparative angle vis-¨¤-vis the world and the rest of Asia, and finally focuses on the evolution of the external position of China. Although the investigations are preliminary in nature, this paper demonstrates how China has emerged as an important net creditor in an increasingly integrated world and suggests that as China becomes more important globally as a net creditor, the balance sheet analysis of trends and a clearer focus on real total rates of return on external assets, and their risk management, have become increasingly more important over time. It is hoped that this paper will stimulate more academic and policy analysis in this growing area of policy importance.
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Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number
012008.
Length: 28 pages Date of creation: Jan 2008 Date of revision: Handle: RePEc:hkm:wpaper:012008
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References listed on IDEAS 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.:
Philip R. Lane & Gian Maria Milesi-Ferretti, 2007.
"A Global Perspective on External Positions,"
NBER Chapters,
in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 67-102
National Bureau of Economic Research, Inc.
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