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Maintaining Financial Stability in the People's Republic of China during Financial Liberalization

Author

Listed:
  • Nicholas Borst

    (Federal Reserve Bank of San Francisco)

  • Nicholas Lardy

    (Peterson Institute for International Economics)

Abstract

The banking system of the People's Republic of China (PRC) is now the largest in the world, and its capital markets are rapidly approaching the size of those in the advanced economies. This paper traces the evolution of the PRC's financial system away from a traditional bank-dominated and state-directed financial system toward a more complex, market-based system and analyzes the optimal sequence of financial reforms needed to manage the new risks accompanying this evolution.

Suggested Citation

  • Nicholas Borst & Nicholas Lardy, 2015. "Maintaining Financial Stability in the People's Republic of China during Financial Liberalization," Working Paper Series WP15-4, Peterson Institute for International Economics.
    • Handle: RePEc:iie:wpaper:wp15-4
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    File URL: https://www.piie.com/publications/working-papers/maintaining-financial-stability-peoples-republic-china-during-financial
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    References listed on IDEAS

    as
    1. Grant Turner & Nicholas Tan & Dena Sadeghian, 2012. "The Chinese Banking System," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 53-64, September.
    2. Cindy Li, 2014. "China’s interest rate liberalization reform," Asia Focus, Federal Reserve Bank of San Francisco, issue May.
    3. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    4. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    5. Asian Development Bank (ADB), 2014. "Asia Bond Monitor June 2014," ADB Reports RPS146553-2, Asian Development Bank (ADB), revised 24 Jun 2014.
    6. World Bank & the People’s Republic of China Development Research Center of the State Council, 2013. "China 2030 : Building a Modern, Harmonious, and Creative Society," World Bank Publications - Books, The World Bank Group, number 12925, December.
    7. Gang Yi, 2014. "Exchange Rate Arrangements: The Flexible and Fixed Exchange Rate Debate Revisited," MIT Press Book Chapters, in: What Have We Learned? Macroeconomic Policy After the Crisis, edition 1, volume 1, chapter 21, pages 257-262, The MIT Press.
    8. Hooley, John, 2013. "Bringing down the Great Wall? Global implications of capital account liberalisation in China," Bank of England Quarterly Bulletin, Bank of England, vol. 53(4), pages 304-315.
    9. Nicholas R. Lardy, 2014. "Markets over Mao: The Rise of Private Business in China," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 6932, October.
    10. Dong He & Honglin Wang & Xiangrong Yu, 2015. "Interest Rate Determination in China: Past, Present, and Future," International Journal of Central Banking, International Journal of Central Banking, vol. 11(4), pages 255-277, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Damien Cubizol, 2017. "Rebalancing in China: a taxation approach," Working Papers 1732, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    2. Song, Zheng (Michael) & Xiong, Wei, 2018. "Risks in China’s financial system," BOFIT Discussion Papers 1/2018, Bank of Finland, Institute for Economies in Transition.
    3. Francesco Macheda, 2020. "Il ruolo delle imprese a conduzione statale nella lotta della Cina contro il COVID-19 (The role of State-Owned Enterprises in China's fight against the coronavirus disease)," Moneta e Credito, Economia civile, vol. 73(290), pages 111-139.
    4. Cubizol, Damien, 2018. "Transition and capital misallocation: the Chinese case," Journal of International Money and Finance, Elsevier, vol. 81(C), pages 88-115.
    5. Damien Cubizol, 2017. "Transition and capital misallocation: the Chinese case," Working Papers halshs-01176919, HAL.
    6. Song, Zheng (Michael) & Xiong, Wei, 2018. "Risks in China's financial system," BOFIT Discussion Papers 1/2018, Bank of Finland Institute for Emerging Economies (BOFIT).
    7. repec:zbw:bofitp:2018_001 is not listed on IDEAS
    8. Cubizol, Damien, 2020. "Rebalancing in China: A taxation approach," China Economic Review, Elsevier, vol. 60(C).
    9. Guariglia, Alessandra & Yang, Junhong, 2016. "A balancing act: Managing financial constraints and agency costs to minimize investment inefficiency in the Chinese market," Journal of Corporate Finance, Elsevier, vol. 36(C), pages 111-130.

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    More about this item

    Keywords

    financial development; government policy and regulation;

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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