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Dollar Funding Stresses in ChinaChina

In: Fault Lines After COVID-19

Author

Listed:
  • Laura E. Kodres

    (MIT Golub Center for Finance and Policy)

  • Leslie Sheng Shen

    (MIT Golub Center for Finance and Policy
    Federal Reserve Bank of Boston)

  • Darrell Duffie

    (Stanford University)

Abstract

The need for US dollar funding during the financial stresses in mid-March 2020, as the COVID pandemic news shocked markets, was evident in a number of countries. Notably, however, China’s dollar liquidity needs received little attention. Given China’s deepening economic and financial linkages to the United States and rest of the world, financial instability there could have implications for the global economy. We provide a deeper understanding of the dollar funding needs of Chinese banks and non-financial corporations and show that China’s vulnerability to US dollar funding risk is large and growing. We further discuss the existing and potential avenues through which US dollar funding could be supplied to Chinese entities in times of stress.

Suggested Citation

  • Laura E. Kodres & Leslie Sheng Shen & Darrell Duffie, 2023. "Dollar Funding Stresses in ChinaChina," Springer Books, in: Robert Z. Aliber & Már Gudmundsson & Gylfi Zoega (ed.), Fault Lines After COVID-19, pages 109-131, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-26482-5_7
    DOI: 10.1007/978-3-031-26482-5_7
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