IDEAS home Printed from https://ideas.repec.org/p/ris/adbiwp/0279.html
   My bibliography  Save this paper

Causes of and Remedies for the People’s Republic of China’s External Imbalances: The Role of Factor Market Distortion

Author

Listed:
  • Huang, Yiping

    (Asian Development Bank Institute)

  • Tao, Kunyu

    (Asian Development Bank Institute)

Abstract

The current account surplus of the People’s Republic of China (PRC) has drawn much foreign and domestic attention. This paper focuses on the reasons and remedies for the PRC’s current account surpluses. Rather than deploying the standard explanations, we argue that asymmetric market liberalization and the related factor market distortion is the root reason for the PRC’s external imbalances. These cost distortions have artificially lowered PRC production costs, raised profits, and improved their products’ international competitiveness which has not only stimulated the economy, but also brought about severe structural risks. We completed a crude estimation for factor cost distortions in the PRC during 2000–2009 which matched its current account surpluses quite well. In order to rebalance the economy, we recommend that the PRC should adopt a comprehensive reform package focusing on removing the factor market distortions.

Suggested Citation

  • Huang, Yiping & Tao, Kunyu, 2011. "Causes of and Remedies for the People’s Republic of China’s External Imbalances: The Role of Factor Market Distortion," ADBI Working Papers 279, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0279
    as

    Download full text from publisher

    File URL: http://www.adbi.org/files/2011.04.14.wp279.causes.remedies.prc.external.imbalances.pdf
    File Function: Full text
    Download Restriction: no

    References listed on IDEAS

    as
    1. Leo de Haan & Hubert Schokker & Anastassia Tcherneva, 2008. "What Do Current Account Reversals in OECD Countries Tell Us About the US Case?," The World Economy, Wiley Blackwell, vol. 31(2), pages 286-311, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tomoyuki Fukumoto & Ichiro Muto, 2012. "Rebalancing China's Economic Growth: Some Insights from Japan's Experience," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 20(1), pages 62-82, January.
    2. Gauvin, Ludovic & Rebillard, Cyril, 2013. "Towards Recoupling? Assessing the Impact of a Chinese Hard Landing on Commodity Exporters: Results from Conditional Forecast in a GVAR Model," MPRA Paper 65457, University Library of Munich, Germany.
    3. M. Albert & C. Jude & C. Rebillard, 2015. "The Long Landing Scenario: Rebalancing from Overinvestment and Excessive Credit Growth. Implications for Potential Growth in China," Working papers 572, Banque de France.
    4. Antonia Reinecke & Hans-Jörg Schmerer & Carsten A. Holz & Frederik Kunze & Torsten Windels & Horst Löchel & Markus Taube, 2016. "Chinas Wachstumsmodell in Schwierigkeiten: Wie groß ist das Risiko für die Weltkonjunktur?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 69(07), pages 05-20, April.

    More about this item

    Keywords

    prc; current account surplus; economic rebalancing; exchange rate; factor market distortion;

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    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:ris:adbiwp:0279. 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: (ADB Institute). General contact details of provider: http://edirc.repec.org/data/adbinjp.html .

    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.

    We have no references for this item. You can help adding them by using 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.