IDEAS home Printed from
   My bibliography  Save this paper

China and the Two Crises: From 1997 to 2009


  • Naughton, Barry


China appears to have successfully weathered the worst impact of both the Asian Financial Crisis (1997-98) and the Global Financial Crisis (2008-2009). Chinese leaders did respond quickly, and on occasion massively, to the challenge of external crisis. In retrospect, however, each crisis response can be seen to have involved an element of over-shooting, which was followed by domestic reformulation and retrenchment. This paper will track commonalities and differences of the two crises in three dimensions: immediate macroeconomic crisis response; institutional adaptations; and trade and exchange rate policies. The discussion will clarify that the very “success” of the response to the AFC laid the foundation for deeper economic problems relating to the GFC. In turn, the response to the GFC gave government officials and state-owned enterprises control over an even larger volume of resources, and reduced the accountability of both officials and financial institutions, changes that inevitably have softened budget constraints, reduced individual risk, and encouraged even larger investments. In consequence, the Chinese economy now faces accumulating problems from the maladaptation of domestic institutions, a maladaptation that is not unrelated to the crisis response.

Suggested Citation

  • Naughton, Barry, 2013. "China and the Two Crises: From 1997 to 2009," Working Papers 53, JICA Research Institute.
  • Handle: RePEc:jic:wpaper:53

    Download full text from publisher

    File URL:
    Download Restriction: no

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Guonan Ma, 2006. "Sharing China's Bank Restructuring Bill," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 14(3), pages 19-37.
    2. Yu Yongding, 2007. "Global Imbalances and China," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 40(1), pages 3-23, March.
    3. Barry Naughton, 2007. "The Chinese Economy: Transitions and Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262640643, July.
    4. Park, Dong-hyun & Shin, Kwanho & Jongwanich, Juthathip, 2009. "The Decline of Investment in East Asia since the Asian Financial Crisis: An Overview and Empirical Examination," ADB Economics Working Paper Series 187, Asian Development Bank.
    Full references (including those not matched with items on IDEAS)

    More about this item


    China ; Asian Financial Crisis ; Global Financial Crisis ; monetary policy ; stimulus ; economic reform;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jic:wpaper:53. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Japan International Cooperation Agency Library). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.