Features of monetary mechanism of China economy development

Valentin P. Vyshnevsky, Oleksiy V. Matyushin, Elena M. Vyshnevska

Abstract


The article deals with the modern features of monetary mechanism of China and expected effects of its operation taking into account new economic, institutional and geopolitical circumstances of its development caused, in particular, by the global financial crisis of 2007-2008 and the economic recovery of the global South. The possibility of adapting the Chinese experience to meet the new challenges facing the economy of Ukraine in general and its industry, in particular, at the present stage of development is determined. It is concluded that now, when the Chinese economy has become the first in the world (taking into account PPP) and it is moving to a new stage of its development, the monetary mechanism of economic growth is changing to the "market" direction, but gradually and consistently. Monetary authorities neither recklessly perform the insistent recommendations of international financial institutions to accelerate the creation of a more liberal financial system nor exclude them, but they adapt well-known Western monetary instruments to the specific problems of national development after they are tested in practice. China's success of really planetary scale and consequences have been achieved with the direct participation of the central bank, which provides oversight and control over the financial sector under the leadership of the State Council of China with the dominance of large state-owned banks in the structure the financial system, "non-market" consistently low rate of CNY in relation to the US dollar and "non-market" interest rates on deposits and loans, and an undeveloped stock market. Within the next years China's economy will gradually slow down in line with the strategy of the government to ensure a balanced economic growth. It will be maintained by low oil prices and the prospects for global economic growth that are slightly better than it was expected before, and the possibility of a sharp correction in the property market and increasing indebtedness of local authorities remain among the major risks. Monetary policy is crucial in transition to such a model, and in conjunction with other regulatory tools of mixed economy it is aimed at achieving macroeconomic and financial stability, efficient allocation of scarce resources, and mitigation of shocks of internal and external origin.

Keywords


monetary stimulus; People's Bank of China; monetary policy; interest rate; loan processes; economic growth

Full Text:

PDF

References


Bernanke, B.S. (2012, April 13). FRB: Speech - Bernanke, Some Reflections on the Crisis and the Policy Response. Retrieved from http://www.federalreserve.gov/newsevents/speech/bernanke20120413a.htm.

Bird, M. (2014). China Just Overtook the US as the World's Largest Economy. Retrieved from http://www.businessinsider.com/china-overtakes-us-as-worlds-largest-economy-2014-10.html.

Carpenter, J.N., Lu. F. & Whitelaw, R. (2014). The Real Value of China's Stock Market. Retrieved from http://ssrn.com/abstract=2519886.

World Bank. Development Research Center of the State Council, P.R.C. (2012). China 2030: Building a Modern, Harmonious, and Creative High-Income Society. Retrieved from http://www.worldbank.org/content/dam/Worldbank/document/China-2030-complete.pdf.

Bloomberg News (2014). China Slowdown Deepens as Targeted Stimulus Fails. Retrieved from http://www.bloomberg.com/news/2014-11-14/china-new-credit-growth-misses-economists-estimates-on-slowdown.html.

Bloomberg.com (2014). China’s PBOC Cuts Interest Rates for First Time Since 2012. Retrieved from https://www.bloomberg.com/news/2014-11-21/china-central-bank-cuts-interest-rates-for-first-time-since-2012.html.

Evans, R. (1997). Deng Xiaoping and the Making of Modern China. Penguin Books.

Fan, S., Kanbur, R., Wei, S.-J. & Zhang Xiaobo (2013, November). The Economics of China: Successes and Challenges. National Bureau of Economic Research, NBER Working Paper 19648.

Gayou, D.G. (2014). China Foreign Exchange Reserves: $4 Trillion and Counting. Retrieved from http://dailysignal.com/2014/06/20/china-foreign-exchange-reserves-4-trillion-counting.

Liao, W. & Tapsoba, S. J.-A. (2014, May). China’s Monetary Policy and Interest Rate Liberalization: Lessons from International Experiences. International Monetary Fund, IMF Working Paper, Asia

and Pacific Department, WP/14/75.

Maddison, A. (2007). Contours of the World Economy, 1-2030 AD. Essays in Macro-Economic History, New York: Oxford University Press Inc.

Michael, B. (2014). Moody's: Slowdown in China, EU, Brazil and South Africa Drag on Global Growth for 2015/16. Retrieved from http://www.ibtimes.co.uk/moodys-slowdown-china-eu-brazil-south-africa-drag-global-growth-2015-16-1474075.

National Intelligence Council, USA (2012). Global Trends 2030: Alternative Worlds. NIC.

The Economist (2012, May 26). Pedalling Prosperity. The Economist Special Report: China’s Economy. Retrieved from www.economist.com/node/21555762.

Prasad, E. & Zhang Boyang. (2014). Monetary policy in China / E. Prasad. In Fan, Sh., Kanbur, R., Wei, Sh.-J. & Zhang, X. (Eds.). The Oxford Companion to the Economics of China. (pp. 195-199.) Oxford, UK: Oxford University Press.

The Economist (2014). Shadow banking in China. Battling the darkness. Retrieved from http://www.economist.com/news/finance-and-economics/21601872-every-time-regulators-curb-one-form-non-bank-lending-another-begins.

Stocknavigator.ru (2015). Shanghai Composite. Retrieved from http://www.stocknavigator.ru/?symbol=%24SSEC&m=30&study=&showprev=on&-interval=14&type=3&density%20=1.

Shibor.org. (2014). Shanghai Interbank Offered Rate. Retrieved from http://www.shibor.org/shibor/web/html/index_e.html.

BBC News (2014). Shanghai-Hong Kong Stock Connect gets China go-ahead. Retrieved from http://www.bbc.com/news/business-29983494.

Sun, R. (2013, March). Does Monetary Policy Matter in China? A Narrative Approach. Munich Personal RePEc Archive, MPRA Paper No.45023.

Leonard, M. (Ed.). (2012). The European Council on Foreign Relations. China 3.0. London: ECFR.

The Economist (2014). The People’s Bank of China. China’s central bank should cut interest rates and explain clearly why it is doing so. Retrieved from http://www.economist.com/node/21633818.

Tradingeconomics.com. (2015). China Interest Rate [1996-2015]. Retrieved from http://www.tradingeconomics.com/china/interest-rate.

Transparency International. Corruption Perceptions Index 2014. (2014). Berlin, Germany: International Secretariat.

UNDP, Human Development Report (2013). United Nations Development Programme. The Rise of the South: Human Progress in a Diverse World.

Weber, M., Hans H. Gerth & C. Wright Mills (Eds.). (1946). Essays in Sociology. New York: Oxford University Press.

Weber, M. (1992). The Protestant Ethic and the Spirit of Capitalism. London and New York: Routledge.

Wei, L. (2014). China Allows Wider Currency Fluctuation. WSJ. Retrieved from https://www.wsj.com/articles/china-loosens-yuan-daily-trading-limits-1394882348.

World Bank (2013). Doing Business 2014: Understanding Regulations for Small and Medium-Size Enterprises. Washington, DC: World Bank Group.

Worldbank.org (2015). World Development Indicators 2014. Retrieved from http://data.worldbank.org/sites/default/files/wdi-2014-book.pdf.

Imf.org (2015). World Economic Outlook Database October 2014. Retrieved from http://www.imf.org/external/pubs/ft/weo/2014/02/weodata/index.aspx.

Yang, B. & Huang, E. (2011). Characteristic of the Chinese Tax System and its Cultural Underpinnings: A Comparison with West. Journal of Chinese Tax & Policy. Vol. 1, 1, 13-33.

Zhou, X. (2014). China's Monetary Policy Since the Turn of the Century. Xiaochuan Zhou. Retrieved from http://english.caixin.com/2012-11-30/100467497.html.

Economics.unian.net. (2014). Unemployment in China in 2013 was 4,1%. Retrieved from http://economics.unian.net/soc/876057-bezrabotitsa-v-kitae-v-2013-godu-sostavila-41.html [Russian].

Blinkov, V. (2014). The results of the development of China's economy in 2013 and prospects for 2014. Retrieved from. http://www.riss.ru/analitika/2586-ob-itogakh-razvitiya-ekonomiki-kitaya-v-2013-godu-i-perspektivakh-na-2014-g#.VHHTdkPyRxI [Russian].

Vyshnevskyi, V. P., Vyshnevska, O. M. & Gurnak, O. V. (2014). The role of taxes in the rise of East Asia: the evolutionary aspect. Nauchnye Trudy DonNTU. Ser. ekonom., 2, 5-16. [Russian].

Volpi, V. Mattstei, F. (2012). Asian economic model and the West: the rematch of the "visible hand". Moscow [Russian].

Voskresensky, A. (2014). The unemployment rate in China is a formality. Retrieved from http://www.kommersant.ru/doc/2534234 [Russian].

Ifc-forex.com (2014). The monetary policy of the People's Bank of China is aimed at lowering interest rates. Retrieved from http://www.ifc-forex.com/analysis/17428/ [Russian].

Law.uglc.ru. Law of China (People's Republic of China) on the People's Bank. Retrieved from http://law.uglc.ru/bank.htm [Russian].

Kalabekov, I. G. (2014). Russia, China and the United States in figures. Reference edition. Moscow. [Russian].

Kirdina, S. G. & Kondrashova, L. I. (2009). Institutional analysis of the Chinese model: theoretical discussion and forecast. Retrieved from http://www.kirdina.ru/doc/news/16apr09/1.doc [Russian].

Inform.kz (2014). China became the third largest in the world in terms of the shadow banking sector. Retrieved from http://www.inform.kz:8080/rus/article/2712645 [Russian].

Wforex.ru (2014). China: Monetary policy of the NBK. Retrieved from http://wforex.ru/news/2014-01/kitai-denezhno-kreditnaya-politika-nb [Russian].

Koltashov, V., Kagarlitsky, B. & Ochkina, A. (2014). Contradictions China's economy: the fall as the end of the "miracle". Retrieved from http://www.igso.ru/articles.php?article_id=451 [Russian].

Lo, Ch. (2014). The slowdown in economic growth: made in China. Retrieved from http://finance.rambler.ru/news/analytics/146475474.html [Russian].

Makkinnon, N. (2014). Monetary Policy of China. Retrieved from http://rbcdaily.ru/world/opinion/562949986776804 [Russian].

Manukov, S. (2014). Record balance. Retrieved from http://expert.ru/2014/12/8/rekordnoe-saldo/ [Russian].

News.traders-union.ru (2014). Monetary policy of China in 2014 will remain unchanged - IaftNews. Retrieved from http://news.traders-union.ru/finance/news/200078/ [Russian].

Kitaichina.com (2014). The direction of development of China's economic policy. Retrieved from http://www.kitaichina.com/se/txt/2014-04/03/content_611807.htm [Russian].

Vestifinance.ru (2014). The People's Bank of China will soften monetary policy. Retrived from http://www.vestifinance.ru/articles/43544 [Russian].

Ostrovsky, A. (2014). Development of the Chinese economy: a challenge for the European Union. Retrieved from http://www.igrunov.ru/vin/vchk-vin-civil/globaliz/1149271860.html [Russian].

Remyga, O. V. (2014). Monetary policy and economic growth in China. Retrieved from http://lomonosov-msu.ru/archive/Lomonosov_2014/2495/2200_7089_fe9281.pdf [Russian].

Salitsky, A. The Beijing consensus is a change of milestones in the global economy. Retrieved from http://www.centrasia.ru/newsA.php?st=1179211920 [Russian].

Russian.people.com.cn (2014). A reduction in key interest rates in China will give an impetus to the macroeconomic settlement - experts. Retrieved from http://russian.people.com.cn/n/2014/1125/c31518-8813463.html [Russian].

Solntsev, O. (2008). Features of monetary policy of China. Retrieved from http://www.ecfor.ru/pdf.php?id=2008/5/10 [Russian].

Stiglitz, J. (1998). More Instruments and Broader Goals: Moving toward the PostWashington Consensus. Voprosy ekonomiki, 8, 4-34 [Russian].

Vestifinance.ru (2014). The shadow banking sector of China reached $ 4.7 trillion. Retrieved from http://www.vestifinance.ru/articles/27327 [Russian].

Fedorovsky, A. 2003). Institutional transformations in China: background, features, prospects. Mirovaya ekonomika i mezhdunarodnye otnosheniya, 4, 77-86 [Russian].

Huntington, S (2003). The Clash of Civilizations. Moscow: Izdatelstvo AST [Russian].

TeleTrade (2014). The Central Bank of China is trying to increase the volume of lending to support growth. Retrieved from http://www.teletrade.ru/analytics/news/3408387 [Russian].

TASS (2014). The Central Bank of China cut interest rates for the first time since 2012. Retrieved from http://itar-tass.com/ekonomika/1589360 [Russian].

Rbctv.rbc.ru (2014). Shanghai-connect: why are Chinese indices growing? Retrieved from http://rbctv.rbc.ru/archive/rbc_view/562949993266787.shtml [Russian].

Vestifinance.ru (2015). Bad loans in China have reached a maximum. Retrieved from http://www.vestifinance.ru/articles/49489 [Russian].

China Window (2015). Compulsory social security contributions to the PRC. Retrieved from http://chinawindow.ru/china/legal-information-china/business-faq/social-security-prc/ [Russian].

Oica.net (2015). 2013 Production statistics. Retrieved from http://www.oica.net/category/production-statistics/2013-statistics/.

Focus Economics. Economic Forecasts from the World's Leading Economists (2015). China Economic Report. Outlook, Statistics and Forecasts. Retrieved from http://www.focus-economics.com/countries/china.

BBC News (2015). China sets 2015 growth target at 7%. Retrieved from http://www.bbc.com/news/business-31743423.




DOI: https://doi.org/10.15407/econindustry2015.01.005

Refbacks

  • There are currently no refbacks.