Business Cycle and Stability of China’s Financial and Monetary System

Abstract

The importance of China’s economy and the instability of China’s financial system are in the spotlight recently. This paper uses Austrian Business Cycle Theory to gauge the potential risks of China’s economy. The approach of this paper is a sector analysis, focusing on China’s monetary and financial system, shipping industry, and real estate industry, especially the state-owned enterprises in those sectors. We conclude that China’s central banking system is hurting China’s economy and we also propose reforms to overhaul the system, according to the perspective of praxeology and Austrian School Economics.

Keywords: Austrian Business Cycle Theory, China’s Banking System, China’s Economy

JEL Classification: B53, D8, E310, E32, E52, H12, N15, N27, N45, N65, O53, P11, R3, R4, Y10