Working Paper: NBER ID: w20943
Authors: Joshua Aizenman
Abstract: This paper provides an overview of Chinese financial and trade integration in recent decades, and the challenges facing China in the coming years. China had been a prime example of exported growth, benefiting from learning by doing, and by adopting foreign know-how, supported by a complex industrial policy. While the resultant growth has been spectacular, it comes with hidden but growing costs and distortions. The Chinese export-led growth path has been challenged by its own success, and the Global Financial Crisis forced China toward rebalancing, which is a work in progress. Reflecting on the internationalization of the CNY, one expects the rapid accelerating of the commercial internationalization of the CNY.
Keywords: RMB; Internationalization; Financial Reforms; China; Export-led Growth
JEL Codes: F3; F32; F36; F4; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Financial repression (G28) | Economic growth (O49) |
| Financial repression (G28) | Access to cheap funding for state-owned enterprises (SOEs) (L32) |
| Access to cheap funding for state-owned enterprises (SOEs) (L32) | Overinvestment (G31) |
| Overinvestment (G31) | Diminishing marginal productivity (D24) |
| Global financial crisis (GFC) (F65) | Shift in China's growth strategy towards domestic consumption and investment (F62) |
| Reliance on exports is no longer sustainable (F10) | Necessity for a shift in China's growth strategy (O00) |
| Global financial crisis (GFC) (F65) | Structural change in current account balances (F32) |
| Internationalization of the RMB (F33) | Opportunities and risks (G11) |
| Gradual financial reforms (G18) | Mitigation of potential crises (H12) |
| Rapid full RMB internationalization (F29) | Adverse outcomes (I12) |