Financial Integration and China’s Growth Surge

Rodney Tyers, Yixiao Zhou

Research output: Chapter in Book/Conference paperChapter

Abstract

China’s financial openness, as measured by cross-border flows and asset ownership, peaked during its 2000s growth surge, as did downward pressure on global interest rates and price levels. This was despite China’s restriction of financial inflows to approved FDI and tight controls on private outflows. We therefore consider two different types of financial integration. The first, Type 1, reflects the scale of cross-border flows as proportions of domestic saving or investment. The second, Type 2, indicates the weakness of capital controls and, in particular, the ease of rebalancing the Chinese collective portfolio away from official foreign reserves and across foreign regions. China’s growth surge contributed substantially to the integration of Type 1 but not Type 2. Results from global modelling are summarized showing that, with more Type 2 integration, surge effects within China would have been substantially smaller, while the global impacts on yields and inflation would have been larger.
Original languageEnglish
Title of host publicationChina's Rise and Internationalization
Subtitle of host publicationRegional and Global Challenges and Impacts
EditorsFilip Abraham, Zhaoyong Zhang
Place of PublicationSingapore
PublisherWorld Scientific Publishing
Chapter6
Pages131-175
Number of pages45
ISBN (Electronic)9789811212239
ISBN (Print)9789811210907
DOIs
Publication statusPublished - 2020

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