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China Economic Watch

This blog monitors ongoing developments in China's economy, analyzes the impact of policy changes, and informs readers about new PIIE research on China.

Recent Posts

The Economics of H2O: Water Price Reforms in China

by | July 22nd, 2014 | 11:47 am

In China – as with most countries – the price of water is controlled by the state not the market. The problem with state-control of water prices is that prices are often slow to adjust to supply and demand. Low water prices encourage waste and subsidize water-intensive households and corporations. In a country with abundant […]

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Reforming China’s Capital Markets

by | July 21st, 2014 | 09:47 am

Over the past decade, China’s bank-dominated financial system has rapidly been transformed into a more diverse system where nonbank financial institutions and capital markets play a large role. Trust loans, entrusted loans, bankers’ acceptances, corporate bonds and equity issuances now account for a large portion of financing to the real economy, a stark contrast with […]

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Taking Stock of the Strategic and Economic Dialogue

by | July 14th, 2014 | 05:01 pm

Last week’s high-level bilateral meeting between the United States and China came during a time of increasingly tense relations between the two great powers. A mix of competition and cooperation has always characterized the relationship, but the balance of these two elements has shifted in recent months. Territorial disputes with American allies and an ongoing […]

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A Step Forward for Chinese Local Government Debt

by | July 9th, 2014 | 10:17 am

The Guangdong government announced on June 23 that it had issued RMB14.8 billion in municipal bonds, comprising RMB5.92 billion of 5-year bonds at an interest rate of 3.84 percent, RMB4.44 billion of 7-year bonds at 3.97 percent, and RMB4.44 billion of 10-year bonds at 4.05 percent. Guangdong is the first participant to issue municipal bond […]

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Can Japan Tell Us Where Chinese FDI Is Going In ASEAN?

by , Kevin Stahler | July 3rd, 2014 | 01:57 pm

China’s investors have made steady inroads around the world. In March 2014, the country’s external assets grew to $6.13 trillion, of which outward direct investment (ODI) has played a modest but fast-growing role. While much has already been said about China’s stream of capital into mature economies such in the EU and United States, eliciting […]

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Internet Finance Drives China Banking Reform

by | July 2nd, 2014 | 09:06 am

There has been a significant amount of buzz regarding the rapid growth of internet finance in China. The scope of internet financial products includes money market funds, insurance products, third-party payment platforms, peer-to-peer (P2P) lending, and other more exotic investment products. In other words, internet finance is springing up largely beyond the remit of the […]

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Immaculate Perceptions: Expectations Adjustment to the ‘New’ RMB

by | June 30th, 2014 | 02:58 pm

Voltaire once wrote that “uncertainty is an uncomfortable position, but certainty is absurd”. However, since 2005, investors in the renminbi have achieved a 25% return with minimal volatility [1] – a near certainty in the investment universe. The latter attribute is surely the most attractive, as other assets have outperformed in absolute terms, but have […]

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Expectation Management and Fine-Tuning in China

by | June 12th, 2014 | 10:34 am

2014 GDP growth is in the spotlight despite the government’s efforts de-emphasize the headline growth number and emphasizing structural reforms and environment/resources concerns. Indeed, GDP growth remains the most important indicator and signals the need for balance between growth and reform. China urgently needs a new sustainable growth model as it transforms from an investment and export-driven economy to a consumption-oriented economy. […]

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Why Money Feels Tight in China, Even if it’s Not

by | June 11th, 2014 | 09:33 am

At the end of last month, Premier Li Keqiang promised to take action to cut funding costs for Chinese companies.  His statement is a response to complaints from Chinese companies that tight credit conditions are damaging the economy. The policy response is multipronged, including a targeted cut of the required reserve ratio, keeping interbank borrowing […]

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The “New Normal:” Employment Not Output In China

by | June 9th, 2014 | 05:01 pm

In the past the conventional wisdom was that GDP needed to grow at least 8 percent in China to generate enough jobs to absorb a growing labor force. As we have said before, this convention is changing, especially under the Xi and Li administration. China’s GDP growth has stayed below 8 percent for more than […]

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