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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

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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How Should China Ease Monetary Policy?

by | June 4th, 2014 | 01:56 pm

There is increasing inconsistency between China’s economic fundamentals and the monetary policy, which appears to be too tight.  There has been no major monetary policy change in China since 18 May 2012 when the People’s Bank of China (PBoC) cut the required reserve ratio (RRR) by 50 basis points on 18 May 2012. However, the […]

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Growth of CNH Deposits: Wherefore Art Thou?

by and Joseph E. Gagnon | May 27th, 2014 | 11:36 am

Over the past several years, few topics in international finance have captured the imagination of academics, [pdf] pundits, and policymakers as has the prospect of a global renminbi (RMB) that could challenge the role of the dollar or the euro. Chinese policymakers for their part, have embraced the more limited goal of increasing international usage […]

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A Step Forward for China’s Interbank Market

by | May 17th, 2014 | 07:42 pm

After several months of negotiation behind closed doors, new regulations for the interbank market have now emerged. Last fall, talk of a new set of rules began to surface as regulators caught on to the scope and scale of regulatory arbitrage in the interbank market. The momentum for reform seemed to then fizzle out for […]

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