Currency and Financial Crises - Lessons from the Asian Crises for China?
Wuerzburg Economic Paper No. 15
20 Pages Posted: 10 Apr 2000
Date Written: March 2000
Abstract
The Asian crises also led to a discussion about what China can learn from the destabilising developments observed in the neighbouring countries. The main intention of this paper is to focus on the probability whether China will also face a severe, financial and/or currency crisis. Two main conclusions evolve from the current economic conditions in China. First of all the danger of a currency crisis is not given for China as - apart from the still existing capital controls which avoided massive capital inflows - the interest rate differential to the anchor currency (US$) will not cause excessive short-term capital inflows and thus will not cause a destabilising volume of portfolio investments. Nonetheless a depreciation of the RMB Yuan is discussed in detail. In addition China should continue reforming its financial system by a deeper institutional foundation and solving the problem of bad loans the commercial banks are still struggling with. Reforms should start soon as further capital account liberalisation will raise foreign pressure and the costs of financing the higher debt caused by restructuring banks and enterprises.
JEL Classification: F31, G15, G21, P34
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
China's Changing Financial System: Can it Catch up with, or Even Drive Growth
By James R. Barth and Gerard Caprio
-
China's Changing Financial System: Can it Catch Up With, or Even Drive Growth
By James R. Barth and Gerard Caprio
-
China and the WTO: Progress, Perils, and Prospects
By Peter K. Yu, Gordon G. Chang, ...
-
Two Decades of Reform: The Changing Organization Dynamics of Chinese Industrial Firms
By Shahid Yusuf and Kaoru Nabeshima
-
The Evolution of Bank Lending Patterns in China: A Post-1994 Province-by-Province Analysis
By Richard C. K. Burdekin and Ran Tao
-
An ABC Guide to Provincial Lending Patterns in China: Progress and Prospects
By Richard C. K. Burdekin and Ran Tao