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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

How Vulnerable are Chinese Banks to a Real Estate Downturn?

by | April 24th, 2014 | 05:30 pm

China is currently undergoing a new round of bank stress testing, with a drop in real estate prices certain to be amongst the variables tested. Previous stress tests, both official and unofficial, have downplayed the risks to the banks from a housing price downturn.  For example, a recent report from the Bank of Communications Financial […]

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Will China Finally Tackle Overcapacity?

by | April 22nd, 2014 | 03:36 pm

Chinese economic growth for the past decade has been categorized by controls on resource and capital price increases, excessive levels of investment, and overcapacity in certain industrial sectors. Policymakers have been concerned with overcapacity since 2005 yet even after a decade of regulatory intervention industrial overcapacity has not only persisted but in fact worsened. Figure […]

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Can China Achieve Its 7.5 Percent Growth Target?

by | April 22nd, 2014 | 10:04 am

China announced its first quarter GDP growth in April. The economy slowed to 7.4 percent on a year-over-year basis in the first quarter of 2014, down from 7.7 percent on the same basis in the fourth quarter of 2013, slightly higher than the market expectation of 7.3 percent. Comparing the first quarter of 2014 to […]

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China’s Reserves: Parsing the Recent Data and Rhetoric

by | April 17th, 2014 | 03:29 pm

As China’s policy regarding continued intervention in its currency market increasingly appears to be reaching an inflection point, we have been closely following the data over the past months in order to ascertain whether there has been a change in this policy. The initial conclusions from the first few months of this year were that […]

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Flying Blind: Monitoring Shadow Banking in Emerging Markets

by | April 4th, 2014 | 02:35 pm

In the wake of the global financial crisis, financial regulators worldwide have struggled to adequately address the risks inherent in shadow banking. In the advanced economies, post-crisis regulatory efforts have tamed some of the previous excesses and slowed the growth of shadow banking. Despite these efforts, the shadow banking systems in Europe and the United […]

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Internet Finance: Barbarians in the House

by | April 1st, 2014 | 03:06 pm

Yuebao is now the hottest online “piggy bank” in China. It is essentially an online money market fund at Alibaba managed by Tianhong Asset Management Corporation that offers daily settlement of interest returns up to 6.76% annualized rates, 27 times higher than that at the transaction account in banks. The fund’s rising yield since last […]

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Reforms, Fast and Slow: The Near-term Outlook for Reforms to China’s Exchange Rate Policy

by | March 24th, 2014 | 01:17 pm

THERE is the sweet scent of reform in the air these days in Beijing, but not all reforms are equally sweet for China’s leadership. Many analysts are optimistic about the prospects for reform following Premier Li Keqiang’s speech to the National People’s Congress on March 5th, and also with the recent announcement that by the […]

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Don’t Get Fooled by China’s Tricky FDI Numbers, It is Still Number One

by | March 13th, 2014 | 04:04 pm

Growth in foreign direct investment in the five leading ASEAN economies (Singapore, Indonesia, Thailand, Malaysia, Philippines) led to speculation these countries have now displaced China as the leading destination for multinationals. However, closer examination shows China likely remains the world leader. China publishes two series on foreign direct investment. The first, produced by the Ministry […]

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Injecting a Little Risk into the Chinese Financial System

by | March 11th, 2014 | 04:54 pm

Moral hazard is a large and ongoing problem in the Chinese financial system. The past few years are full of examples of investors seeking government intervention on their behalf when a financial product goes bad. We have seen this type of behavior for bonds, trust products, wealth management products, real estate investments, and even individual […]

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Finally! Good High Frequency Data on China’s Purchase of Treasuries

by | March 11th, 2014 | 02:52 pm

On February 28th, the US Treasury released the preliminary data for the annual TIC survey. While this data is subject to minor revision when the final data is released in April, this data provides a more detailed and accurate depiction of foreign ownership of US assets than the monthly surveys – or so it is commonly believed. […]

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