China’s Economy in Transition

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China’s Economy in Transition

From External to Internal Rebalancing


Anoop Singh, Malhar Nabar, and Papa N’Diaye


© 2013 International Monetary Fund

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Joint Bank-Fund Library

China’s economy in transition: from external to internal rebalancing / editors, Anoop Singh, Malhar Nabar, and Papa N’Diaye. – Washington, D.C.: International Monetary Fund, 2013.

p.; cm.

Includes bibliographical references.

ISBN: 978-1-48430-393-1 (paper)

1. China—Economic conditions. 2. Exports—China. I. Singh, Anoop. II. Nabar, Malhar. III. N’Diaye, Papa M’B. P. (Papa M’Bagnick Paté). IV. International Monetary Fund.

HC427.95.C45 2013

Disclaimer: The views expressed in this book are those of the authors and should not be reported as or attributed to the International Monetary Fund, its Executive Board, or the governments of any of its members.

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  • Acknowledgments

  • Contributors

  • Abbreviations

  • Introduction and Overview


  • 1 | An End to China’s Imbalances?

    • Ashvin Ahuja, Nigel Chalk, Malhar Nabar, Papa N’Diaye, and Nathan Porter

  • 2 | Investment in China: Too Much of a Good Thing?

    • Il Houng Lee, Murtaza Syed, and Liu Xueyan

  • 3 | China’s Rapid Investment, Potential Output, and Output Gap

    • Papa N’Diaye and Steven Barnett

  • 4 | Determinants of Corporate Investment in China: Evidence from Cross-Country Firm-Level Data

    • Nan Geng and Papa N’Diaye

  • 5 | Interest Rates, Targets, and Household Saving in Urban China

    • Malhar Nabar


  • 6 | Implications for Asia from Rebalancing in China

    • Olaf Unteroberdoerster

  • 7 | Investment-Led Growth in China: Global Spillovers

    • Ashvin Ahuja and Malhar Nabar

  • 8 | The Spillover Effects of a Downturn in China’s Real Estate Investment

    • Ashvin Ahuja and Alla Myrvoda


  • 9 | Chronicle of a Decline Foretold: Has China Reached the Lewis Turning Point?

    • Mitali Das and Papa N’Diaye

  • 10 | How Pro-Poor and Inclusive Is China’s Growth? A Cross-Country Perspective

    • Ravi Balakrishnan, Chad Steinberg, and Murtaza Syed

  • 11 | De-Monopolization toward Long-Term Prosperity in China

    • Ashvin Ahuja

  • 12 | Transforming China: Insights from the Japanese Experience of the 1980s

    • Papa N’Diaye

  • 13 | The Next Big Bang: A Road Map for Financial Reform in China

    • Nigel Chalk and Murtaza Syed

  • 14 | Summation

    • Markus Rodlauer

  • Index


The authors would like to express their gratitude to IMF colleagues whose work on China and Asia has been instrumental in shaping the chapters that appear in this volume, particularly Steve Barnett, Nigel Chalk, and Markus Rodlauer. The analysis presented here has also benefited from discussions with officials and analysts in China, elsewhere in Asia, and in Washington, D.C.

We are grateful to Imel Yu and Alla Myrvoda for assistance with putting the volume together, and to Joe Procopio for editing the volume and coordinating its production.

The opinions expressed in this book, as well as any errors, are the sole responsibility of the authors and do not necessarily reflect the views of other members of the IMF staff, Asian authorities, or the Executive Directors and Management of the IMF.


Ashvin Ahuja is a Senior Economist in the IMF’s Asia and Pacific Department and leads the missions to the Lao People’s Democratic Republic. He covered China and Hong Kong SAR from 2010 to 2012. Before joining the IMF in 2010, Mr. Ahuja worked at the Bank of Thailand. He holds a PhD in economics from the University of Minnesota.

Ravi Balakrishnan completed his PhD in economics at the London School of Economics. Since joining the IMF, he has worked on various countries, including the United States, as well as on the World Economic Outlook, before taking up his current position as the IMF’s Resident Representative based in Singapore. His policy and research interests cover labor and job dynamics, inflation dynamics, exchange rate dynamics and capital flows, and capital markets and financial systems. His research has been published in the European Economic Review, the Journal of International Money and Finance, and IMF Staff Papers.

Steve Barnett is a Division Chief in the Asia and Pacific Department of the IMF. He has spent the better part of the past 10 years covering Asia, including serving as Assistant Director at the IMF Office for Asia and the Pacific in Tokyo, Resident Representative in China, and Resident Representative in Thailand. Before joining the IMF in 1997, he earned his PhD in economics from the University of Maryland. He has a bachelor’s degree in economics from Stanford University, as well as a master’s degree in Russian and East European Studies, also from Stanford.

Nigel Chalk is Deputy Director in the Asia and Pacific Department and headed the IMF’s missions to China and Hong Kong SAR from 2008 to 2011. Before that, he worked on a range of emerging market countries, including Russia, the Republic of Korea, Brazil, and Argentina. He holds a master’s degree in economics from the London School of Economics and a PhD from the University of California, Los Angeles.

Mitali Das is a Senior Economist in the IMF’s Research Department. Before joining the Fund in 2009, Ms. Das taught at Columbia University from 1998 to 2006 and the University of California, Davis, between 2006 and 2009. At the IMF, she has worked in the Open-Economy Macroeconomics and Multilateral Surveillance divisions of the Research Department. She received a PhD in economics from the Massachusetts Institute of Technology in 1998.

Nan Geng is an Economist in the IMF’s European Department. Since joining the IMF, she has worked on a range of Asian and European economies, including China, and produced publications on inflation and monetary policy, exchange rate unification, deleveraging and credit growth, spillover, and fiscal adjustment and debt sustainability. Ms. Geng, a Chinese national, holds a PhD in economics from the University of California, Santa Cruz.

Il Houng Lee was the IMF’s Chief Resident Representative in Beijing, China, from 2010 to 2013. Mr. Lee joined the IMF through the Economist Program in 1989. Since then, he has worked in various departments, and his country assignments in Asia have included a wide range of economies including Japan, Thailand, Malaysia, the Philippines, and Vietnam. Before coming to China, he was an Advisor in the Asia and Pacific Department working as the mission chief on the Philippines. Mr. Lee has a BSc in economics from the London School of Economics, and a PhD in economics from Warwick University. He taught economics at Warwick University and at the National Economics University in Hanoi.

Liu Xueyan is a Senior Fellow in the Academy of Macroeconomic Research at the National Development and Reform Commission (NDRC) of China. Ms. Xueyan has a PhD in economics from Nankai University. Her contribution to this volume was co-authored with Il Houng Lee and Murtaza Syed, Resident Representatives in China, while she was a visiting scholar at the IMF office in Beijing.

Alla Myrvoda is a Research Analyst in the IMF’s Asia and Pacific Department, covering China, Hong Kong SAR, and Taiwan Province of China. Before joining the Fund in 2011, Ms. Myrvoda worked at the Urban Institute. She holds a master’s degree in economics from Johns Hopkins University.

Malhar Nabar is a Senior Economist in the IMF’s Asia and Pacific Department, covering China and Hong Kong SAR. He previously worked in the Regional Studies Division of the Asia and Pacific Region. His research interests are in financial development, investment, and productivity growth. Before joining the IMF in 2009, Mr. Nabar was on the economics faculty at Wellesley College. He holds a PhD in economics from Brown University.

Papa N’Diaye is Deputy Division Chief in the IMF Strategy, Policy, and Review Department. Before this, Mr. N’Diaye worked on the China, Japan, and Malaysia desks at the IMF. He studied at Sorbonne University, specializing in macroeconomics and econometrics, and taught macroeconomics to undergraduate students at Dauphine University. Mr. N’Diaye has numerous publications on various topics, including monetary policy, asset prices, macroprudential policies, fiscal policy, and rebalancing growth in China.

Nathan Porter is Deputy Division Chief in the IMF’s Strategy, Policy, and Review Department. Previously he worked in the Asia and Pacific Department, covering China and Hong Kong SAR. Mr. Porter holds a PhD in economics from the University of Pennsylvania.

Markus Rodlauer is Deputy Director of the IMF’s Asia and Pacific Department. He was head of the team that prepared the 2012 and 2013 Article IV Consultations for the People’s Republic of China. His previous operational responsibilities include being Deputy Director in the Western Hemisphere Department, Assistant Director in the Asian Department, and IMF Representative to Poland and the Philippines. Mr. Rodlauer worked with the Ministry of Foreign Affairs of Austria before joining the IMF. His academic training includes degrees in law, economics, and international relations.

Anoop Singh has been Director of the Asia and Pacific Department of the IMF since November 2008. Before this, Mr. Singh was Director of the Western Hemisphere Department. Mr. Singh, an Indian national, holds graduate and postgraduate degrees from the universities of Bombay and Cambridge and the London School of Economics. His other appointments at the IMF have included Director, Special Operations, in the Office of the Managing Director; Senior Advisor, Policy Development and Review Department; Assistant Director, European Department; and IMF Resident Representative in Sri Lanka. His additional work experience includes Special Advisor to the Governor of the Reserve Bank of India (I.G. Patel and Manmohan Singh); Senior Economic Advisor to the Vice President, Asia Region, the World Bank; adjunct professor at Georgetown University; and sometime lecturer at Bombay University. Mr. Singh has worked and written on macroeconomics, surveillance, and crisis management issues, helping design IMF-supported programs in emerging market, transition, and developing countries in South and Southeast Asia, Eastern Europe, and Latin America. He led missions to Thailand, Indonesia, and Malaysia during the Asian crisis; to Vietnam, Bulgaria, and Albania during their early transition experiences; and to a number of other countries in Asia and in the Americas, including Argentina, Australia, China, India, Japan, and the Philippines.

Chad Steinberg is a Senior Economist in the IMF’s Strategy, Policy, and Review Department. He joined the IMF in 2002 and was most recently assigned to the IMF’s Regional Office for Asia and the Pacific in Tokyo between 2008 and 2012. His research interests include international trade, economic development, and labor markets. He holds a PhD from Harvard University.

Murtaza Syed is the IMF’s Deputy Resident Representative in China. He has previously covered a broad range of Asian economies, including Japan, the Republic of Korea, Hong Kong SAR, and Lao PDR. He has also been involved in the IMF’s regional surveillance in Asia and its programs with Dominica and Myanmar. His research interests include trade, investment, inequality, fiscal sustainability, and financial spillovers. Mr. Syed has a PhD in economics from Oxford University (Nuffield College). Before joining the IMF, he worked at the Institute for Fiscal Studies in London and the United Nations Development Programme–sponsored Human Development Center in Islamabad.

Olaf Unteroberdoerster is Deputy Chief of the IMF’s Regional Studies Division for the Asia and Pacific Region. His research interests include international trade, financial integration and liberalization, and economic rebalancing. He is currently also IMF Mission Chief for Cambodia, and between 2007 and 2009 was the IMF’s Resident Representative in Hong Kong SAR. Before joining the IMF in 1998, Mr. Unteroberdoerster was a visiting researcher at Hitotsubashi University and the United Nations University, both in Tokyo. He studied economics and business administration in Germany, France, and the United States and holds a PhD in international economics and finance from Brandeis University.



Bayesian vector autoregression


certificate of deposit


Direction of Trade Statistics


fixed asset investment


factor-augmented vector autoregression


foreign direct investment


Group of Seven


Group of 20


Global Integrated Monetary and Fiscal Model


Lewis Turning Point


nonaccelerating inflation rate of unemployment


newly industrialized economy


ordinary least squares


People’s Bank of China


purchasing power parity


real effective exchange rate


Special Administrative Region


total factor productivity


United Nations


World Economic Outlook


World Trade Organization

From External to Internal Rebalancing