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Lessons for China from financial liberalization in Scandinavia


  • Hongyi Chen
  • Lars Jonung
  • Olaf Unteroberdoerster


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.

Suggested Citation

  • Hongyi Chen & Lars Jonung & Olaf Unteroberdoerster, 2009. "Lessons for China from financial liberalization in Scandinavia," European Economy - Economic Papers 2008 - 2015 383, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  • Handle: RePEc:euf:ecopap:0383

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    References listed on IDEAS

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    Cited by:

    1. Yu-Wei Hu, 2010. "Management of China's foreign exchange reserves: a case study on the state administration of foreign," European Economy - Economic Papers 2008 - 2015 421, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Jonung, Lars, 2009. "Financial Crisis and Crisis Management in Sweden. Lessons for Today," ADBI Working Papers 165, Asian Development Bank Institute.
    3. Funke, Michael & Paetz, Michael, 2012. "Financial system reforms and China's monetary policy framework : A DSGE-based assessment of initiatives and proposals," BOFIT Discussion Papers 30/2012, Bank of Finland, Institute for Economies in Transition.
    4. 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.

    More about this item


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

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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