China is on a path to capital account liberalization. If the renminbi is to become an international reserve currency (e.g. Prasad, 2016), as it has started to and one day will be, China must have an open capital account. But once the capital account is open, the economy will be exposed to gyrations of the global financial cycle (Rey, 2014). This column argues that international credit supply shocks have powerful effects on real and financial variables of the receiving countries, but not all economies are affected similarly, and those that have lower loan-to-value ratios (LTVs) and limits on foreign currency borrowing (FXLs) are less vulnerable. As China lowers controls on capital flows (e.g., Benigno et al., 2016) it should consider tightening domestic macro-prudential policy regulations (e.g., Cesa-Bianchi and Rebucci (2017) to avoid excessive volatility.
We provide the first regional breakdown of GDP per head for China from the Song dynasty to the Qing, so that regions of similar size can be compared between Europe and Asia to establish the timing of the Great Divergence of living standards.
Residential investment has been a key growth engine for China in the last two decades. Total housing investment grew from about 4 percent of GDP in 1997 to a peak of 15 percent of GDP in 2014, with residential investment accounting for more than two-thirds of it. Our analysis indicates that structural changes in the Chinese economy that led to rebalancing toward consumption...
Gift expenditures grow swiftly in rural China and may adversely affect people's welfare. While gift-giving helps to maintain social status and connections, gift competition may create a predicament: people must spend more and more to "keep up with the Joneses." As a result, the escalating gift expenses crowd out spending on other important consumption and become increasingly burdensome to people in rural areas, particularly to the poor.
It has been widely argued that government bonds can be used as a reference point for pricing corporate bonds. This “reference” role can reduce the cost of corporate borrowing. The authors study this question by examining a unique experiment in China. China issued two sovereign bonds denominated in U.S. dollars (USD) in October 2017, the first...