China Staves Off Devaluation
China has come to the forefront of the international finance scene following the East Asian financial crisis for two reasons. First, the post reform Chinese economy closely resembles the other East Asian countries. China experienced significant levels of growth led by exports, with a rapid expansion in labor-intensive exports in its early stage of development. Rapid growth was accompanied by a rapid increase in domestic savings and massive inflows of foreign capital (Perkins, 1986). The banking sector dominated financial intermediation and the ratio of non-performing loans was high. Estimates put non-performing loans at China's four leading banks at 25 per cent -- far higher than in South Korea or Thailand before they fell prey to the Asian contagion. Would China be the next victim of the crisis? (Dornbusch, 1997).The second reason why China came to the forefront of the international finance scene following the East Asian financial crisis is China's economic performance became the key to the current economic stability of East Asia. During 1997 - 1998, China was the only country in the region to sustain significant growth. In particular, maintaining the stability of the renm
Source: State Statistics Bureau, Chinese Statistical Yearbook, 1998 and CEIC Data Company Limited, Hong Kong. Merchandise Trade Balance (US$ billion) 16.7 12.2 40.3 43.6 29.2 The banking sector cannot be reformed separately; it works together with state-owned enterprises and public finance policy. Although the state-owned enterprises are undergoing consistent reform as China works to become internally and internationally competitive in all areas, they are still very inefficient by Western standards. In 1996, these enterprises had a net loss of 38 billion renminbi, a trend that has continued to this day (SSB 1997). The banking and trade systems in China are largely under government control, although rules were eased in the mid-1990s to allow greater foreign and private participation in the financial sector. The People's Bank of China is the central financial institution and the sole source of currency issue, as discussed in class. China's international accounts and foreign currency arrangements are primarily the concern of the Bank of China. China's GDP grew at 8.8% in 1997 and 7.8 percent in 1998. Strong growth momentum was sustained in 1999, with a slightly reduced GDP growth rate of 7.1% (State Statistics Bureau, 1999). This is remarkable, considering the negative growth rates experienced by most of China's neighbors for the same time period.
Some common words found in the essay are:
World Bank, Europe China's, Control SAEC, Huang Yang, East Asia, Chinese Communist, USD Beijing, China Collectively, China China, East Asian, foreign exchange, exchange rate, foreign trade, chinese economy, non-performing loans, trade balance, import export, east asian, bank china, china's foreign, foreign direct investment, foreign exchange controls, 1998 ceic data, yearbook 1998 ceic, statistical yearbook 1998,
Approximate Word count = 4519
Approximate Pages = 18 (250 words per page double spaced)
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