China Economic Watch

SOE Dividends and Economic Rebalancing

Nicholas Borst — Fri, 11 May 2012 16:28:13 +0000

One of the more interesting things to come out of the most recent Strategic and Economic Dialogue was a little more specificity on the topic of state-owned enterprises (SOEs) dividend reform. Given the intense disagreements within the Chinese government over this topic, moving forward with reforms is extremely difficult. Chinese negotiators agreed to the following [...]

Can China Reflate the Housing Market?

Nicholas Borst — Thu, 19 Apr 2012 21:11:22 +0000

China’s extraordinary real estate boom may finally be over. Multiple indicators suggest that China is on the precipice of a significant market correction. Prices are down in more than half of the 70 cities surveyed by National Bureau of Statistics. Beyond price data (which is subject to some skepticism), residential floor space under construction, residential [...]

Wen Jiabao Has the Wrong Solution for China’s Banks

Nicholas Borst — Wed, 04 Apr 2012 19:39:59 +0000

Criticism of bank profits has now reached the highest levels of the Chinese political system. In a national radio address this week, Premier Wen Jiabao stated that China’s large banks were excessively profitable. Wen’s solution was to open the system up to private capital and smash the monopoly of the large banks. He even referred [...]

Are Chinese Banks Too Profitable?

Nicholas Borst — Thu, 29 Mar 2012 15:06:33 +0000

Quarterly profit announcements by Chinese banks this month have set off a national debate over whether the banking sector is excessively profitable. Criticisms of bank profitability have even come from prominent former People’s Bank of China (PBoC) officials. Wu Xiaoling described bank profits as unreasonable (Chinese language) and Li Daokui referred to banks as profit-devouring [...]

China’s Economic Outlook in 2020 and Beyond

Daniel H. Rosen — Mon, 26 Mar 2012 13:27:22 +0000

Near-term China investment decisions and US trade and economic policymaking are influenced by competing views of China’s longer-term outlook. Yet economic models of China’s long-term growth are shaky, debatable and hence few in number. Official statements from China’s leadership about long-term expectations, and more importantly about the composition of long-term economic growth, are even more [...]

The Challenges of Renminbi Internationalization

Juan Carlos Martinez Oliva — Fri, 23 Mar 2012 14:34:31 +0000

Note: This post is based on an author’s intervention at the International Conference of RCIE, KIET, and APEA on China and the World Economy, Seattle, March 16, 2012. The progress of China towards financial integration and the internationalization of renminbi is a matter of great importance. While the world economy remains financially unstable, accessing the [...]

Can Microcredit Lenders Fill the Gap?

Nicholas Borst — Tue, 13 Mar 2012 14:19:40 +0000

The Chinese press is full of stories documenting the difficulties small and medium enterprises (SMEs) have obtaining financing. Contrary to popular belief, the problem is not that SMEs are being crowded out by large enterprises. The SME share of total business loans has been relatively stable in the past several years. Moreover, the pace of [...]

Household Wealth and the Housing Market

Nicholas Borst — Tue, 06 Mar 2012 20:45:34 +0000

The Chinese housing market is clearly undergoing a correction that may eventually bring housing prices back to a more reasonable level. As the past several years have made all too apparent, housing downturns are economically painful and can lead to larger economic crises. The network of financial leverage that fueled the US housing bubble turned [...]

Capital Account Liberalization and the Corporate Bond Market

Nicholas Borst — Fri, 24 Feb 2012 14:43:53 +0000

The People’s Bank of China (PBoC) released a report (Chinese language) this week that focused on prospects for capital account liberalization. Opening up the capital account would be a major reform, perhaps the most significant in a more than a decade. It would give Chinese savers an escape hatch from financial repression and force the [...]

China’s Rebalancing Will Not Be Automatic

Nicholas R. Lardy — Wed, 22 Feb 2012 14:51:26 +0000

This piece was originally posted on East Asia Forum The imminent rebalancing of China’s economy has been forecast repeatedly over the past several years. With the shrinking of China’s external surplus during 2011, proponents of this argument have all but declared victory. The decrease of the current account surplus, from 10.1 per cent in 2007 to [...]