Index
[Page numbers followed by b, f, n, or t refer to boxed text, figures, notes, or tables, respectively.]
A
Agricultural sector, 157, 183
total factor productivity, 202
Asian economies
China as competitor in, 112–14
China as source of final demand for, 108–10, 108f, 109f
China as supply-chain hub for, 110–12
implications of China’s imbalances for, 107–14
implications of investment patterns in China for, 119
importance of exports to China from, 116–17, 117f
income inequality in, 183, 185–86, 185f, 187–88
investment patterns and trends in, 31–36, 32f, 33f, 35f, 36f, 41–42, 41t, 48, 48f
poverty rate in, 182, 182t, 183f
public spending patterns in, 193–94
rural-urban income gap in, 183
Asset prices, 237–40
Association of Southeast Asian Nations, 186
Australia, 126–27, 133, 149–50
B
Bond markets, global spillover effects of real estate investment in China, 150, 150f, 151f
Brazil, 126, 127, 128, 133, 149, 190, 191–92, 195
Bretton Woods II, 10
C
Canada, 128, 149
Capacity utilization rate, 48, 49f, 51, 53–54, 57–58, 118
Capital flows
financial reform implementation, 252–53, 257, 260–61
Japan’s financial liberalization in 1980s, 223–24
recent patterns, 17
Capital reserves, 17
Capital-to-output ratio, 31, 32, 33–34, 33f, 35f, 36f, 42, 47–48, 47f, 51–52, 59–61, 59f, 61f
Chile, 119, 127
China Investment Corporation, 17
Communications equipment industry, 205
Competition
barriers to entry, 206, 208f
benefits of financial reform, 246–47
current conditions, 205–6
lack of, in services sector, 205
lessons from reform of manufacturing sector, 204–5
Consumption patterns and trends
China’s global share, 109–10, 109f
China’s investment policy and, 34
determinants of, 83–84
domestic imbalances and, 81
future challenges for China, 158
global spillover effects of changes in China’s, 122, 131–32t
goals of financial reform, 245
household, 83
income and, 83, 83f
modeling methodologies, 34–36
policies to influence, 81
policy reform goals, 57–58
real estate investment effects, 145
recent developments in, 2–3
regional implications of China’s, 107
as share of GDP, 83, 83f
Corporate saving
benefits of financial reform, 247
dividend payments and, 66, 67–68
intermediation, 248, 249f
international comparison, 66f
patterns and trends, 19, 244f
sectoral differences, 67
size of firm and, 67–68
Credit markets
China’s policy response to Great Recession, 12
cost of capital, 70–73, 196
determinants of investment, 38
in financial reform roadmap, 259–60, 268
goals of financial reform, 245
growth after interest rate liberalization, 253f
household debt, 238
nonbank system, 244–45, 248–50
outcomes of stimulus spending, 244–45
sources of private investment financing, 68
See also Interest rates
Current account, Japan’s, 226–27, 227f, 235f
lessons from transition to service economy, 217, 218, 231–40
Current account imbalances, China’s alternative modeling scenarios, 17, 24–27, 25f
components of, 11f, 18t
contributing factors, 9, 18, 18t
effect of reforms to address income inequality, 181, 182
future prospects for, 2, 9, 11–12, 21, 22f, 23, 217–18
global imbalances and, 22–23
implications for Asian economies, 3–5, 107, 114
policy reforms to correct, 268–70
pressure for rebalancing of, 233–34
recent developments in, 2–3
recent path of, 11, 12–13, 227f
salient issues in analysis of, 3–5
spillover effects of rebalancing, 159
World Trade Organization accession and, 1–2
See also Trade, China’s
D
Demographic patterns and trends age distribution, 163, 164f, 231f
future challenges for China in, 20, 157, 163, 173
household saving and, 85, 90, 95–96, 95t
investment and, 39–40
in Japan, 229–31, 231f
labor market and, 20, 161f, 162f, 163, 173
Deposit insurance, 268
Dividend payments, 64–65, 65f, 66f, 67–68, 71
Domestic demand, China’s
implications for Asian economies of, 107, 108–10
industrial inventories and, 15
policy reform effects, 20
recent patterns in, 15
E
Education
household saving and, 85
public spending on, 193
wage returns to, 193
Energy
costs, 19, 68–70, 70f
global spillover effects of real estate investment in China, 152
Equity costs, 71, 71f
Exchange rates
contribution to current account imbalances, 18
current account modeling methodologies, 24–25
decomposition of, 16, 17t
future prospects for China, 234–36
Great Recession and, 10, 10f
investment behavior and, 58, 76
projections, 21
recent patterns in, 16, 257f
recommendations for reform, 269–70
in transition to services economy, 218, 220–22, 234–36
External imbalances, generally
causes of, 9–10n
global concerns about, 9, 10, 22–23
global implications of investment patterns in China, 118–22
global trends, 11f
Great Recession and, 10–11
See also Current account imbalances, China’s
F
Factor inputs
cost, 19, 68, 269
economic growth and, 68
market distortions, 19, 269
Family size and structure, 85, 86, 90, 95–96, 99–100, 99t
Fertility rate, 170–71
Financial reform
capital account liberalization, 260–61
deregulation outcomes in labor market, 173
developing broader intermediation in, 258–59
effects of inaction in, 248–50
goals, 58, 245, 267
identifying system weaknesses for, 250
to influence savings and consumption, 101–2, 103
interest rate liberalization, 101–2, 222–24, 241t, 251–52, 252f, 253f, 267–68
Japan’s, of 1980s, 222–24, 223f
lessons from international experience, 250–53, 262–65t
loan and deposit deregulation, 259–60, 268
monetary policy, 256–58
rationale, 244–48, 268
to rebalance growth, 76
recent, 101
risks and opportunities in, 5, 243, 261, 267
roadmap for, 253, 254–56t, 261
supervision and regulation in, 258, 268
Financial sector
access to, distribution of wealth and, 196–99
challenges for China in transition to service economy, 218–19
competition in, 101
institutional risk analysis in, 259
intermediation, 244–45, 248, 249f
liquidity control policies and outcomes, 243, 257
nonbank system, 244–45, 248–50, 258–59
policy reform effects on investment in, 57, 58
prospects for, in absence of reform, 248–50
surplus liquidity in, 101
systemic risk analysis in, 258
See also Financial reform; Interest rates
Five Year Plan, 12th, 19, 23, 57–58, 173, 247–48, 261. See also Policy reforms
Foreign direct investment
recent patterns in, 12–13, 17
trade patterns and, 108, 109f
G
G20 economies
effects of investment slowdown in China on, 122–28, 124f, 125f, 137, 139–40, 147–50, 148–51f
lessons from financial reform experiences, 250–53
General equilibrium modeling, 24
Generalized method of moments estimations, 26t, 38, 93–94
Germany, 1, 9, 14, 58, 133, 220
Great Recession in, 11
spillover effects from China, 119, 126, 127–28, 137, 149, 152
Gini index, 183, 184f, 185f, 187
Global Integrated Monetary and Fiscal Model, 24
Great Recession
China’s policy response to, 12, 14–15, 18–19, 51–52, 61–62, 218, 238, 261
effects of investment and consumption in China on global trade after, 129–32t
future challenges for recovery from, 13
global outcomes of, 10–11
investment patterns in China after, 115
labor market outcomes, 167
outcomes in China, 2, 11–12
Growth, China’s
benefits of financial reform, 246–48
consumer price index during, 230f
contributions to, 37f, 115, 157
current account balance during, 227f
estimates of potential output, 49–52
future challenges and opportunities, 233
global implications of, 22
gross national savings during, 226f
as inclusive, 186, 188–92
international comparison of, 31
investment and, 31, 37–42, 37f, 42, 59, 76, 115
Japan’s growth and, 225f, 226f, 227f, 228f, 229f, 230f, 231–32
labor costs during, 229f
as pro-poor, 186–88, 188t
recent patterns, 51–52, 82–83, 182
share of investment in GDP during, 225f
significance of real estate investment in, 137, 139, 152
standard of living and, 34
trade sector, 1–2
unequal distribution in, 181
urbanization rate during, 230f
H
Health care
household saving and, 85
policy reforms after Great Recession, 18, 100
public spending on, 193
Hodrick-Prescott filter, 52, 52f
Hong Kong, 62
Household saving
benefits of financial reform in, 247
deposit options for, 101–2
determinants of, 81, 85–86, 90, 91t, 95–100
domestic imbalances and, 81
interest rates and, 81–82, 87–88, 87f, 88f, 90–94, 98, 101, 102, 103
intermediation, 248, 249f
motivation and goals for, 82, 89, 102
patterns and trends, 68, 81, 84, 84f, 232, 244f
as percent of disposable income, 81
as percent of GDP, 68
social safety net and, 19
Housing market
household saving behavior and, 86, 90, 97–98, 98t
investment growth in, 115
policy objectives, 19
price trends, 247f
real estate investment spillover effects on, 146
urbanization trends, 20
See also Real estate investment
I
Income, household
distribution of return to capital, 73
goals of financial reform, 245
household consumption and, 83, 83f
household saving and, 81
inclusive aspects of China’s growth, 188–92
from interest, 83
intrafamily transfers, 85–86n
patterns and trends, 34
policy reform effects, 20
real estate investment spillover effects on, 146
rural-urban gap in, 183
services sector deregulation to raise, 269
See also Inequality in China; Wages
Income, per capita
monopoly rights policy and, 203, 213–14
prospects for improving, 201
India, 73, 126, 127, 128, 149, 195
income inequality in, 187–88, 191–92
Indonesia, 126, 150
income inequality in, 187–88, 191–92
Inequality in China
financial access and, 196–99, 197f, 198f
geographic patterns, 183–84, 195
global trends and, 181, 182–86
goals of financial reform, 245
labor market and, 196
patterns and trends, 181–82, 183, 184f, 186–92
policies to address, 4, 181, 182, 192–99
rural-urban income gap, 183, 198
sources of, 181, 186
Inflation, 20
estimates of China’s potential output and, 50, 51
interest rates and, 93
Infrastructure spending
after financial crisis, 14–15
in China’s investment-led growth, 115
current levels, 48
private sector investment, 57, 58
Interest rates
cost of capital, 71
current regulation, 250
deregulation outcomes in labor market, 173
financial reform strategies, 101–2, 241t, 251–52, 267–68
future prospects for China, 236–37
household saving and, 81–82, 87–88, 87f, 88f, 90–94, 98, 101, 102, 103
inflation and, 93
international comparison of, 71, 72f
investment behavior and, 38, 57, 58, 75, 76
Japan’s currency realignment and, 221
Japan’s financial liberalization in 1980s, 222–24, 241t
liberalization outcomes, 252f, 253f
policy reform goals, 58
preconditions for liberalization, 252
short-term patterns, 236f, 260f
Investment patterns and trends
in China, 33–34, 40f, 47–48, 57, 58, 232
concerns about, 32–33, 34, 40–43, 57–58
consumption patterns and, 34
contribution to current account imbalances, 18
cost of capital and, 38, 58
crisis risk and, 40–41, 41t, 43
demographic trends and, 39–40
development status and, 38, 76
distribution by firm ownership type, 61–63, 62f
distribution of fixed asset investment by industry, 138f
economic growth and, 31, 42, 59, 115
financing of, 31–32, 42
future challenges, 43, 48, 57
GDP ratio, 21, 33–34, 37–42, 37f, 47f, 57, 60f
globalization effects, 38
global spillover effects from, 115, 118–27, 120f, 121f, 129–31t, 132–33, 134–35t
government debt, 238
inertia in, 38
intergovernmental arrangements in China, 195
international comparisons of, 31–36, 32f, 33f, 35f, 36f, 41–42, 41t, 48, 48f, 58, 59f
macroeconomic uncertainty and, 39
mispricing errors in financing of, 31–32
neoclassical modeling of, 44–45
sectoral distribution of, 14–15, 48, 57–58
social protection spending, 193–94, 195–96
spillover effects of real estate investment in, 144
strategies for assessing appropriateness of, 34
strategies for reducing wealth inequality, 193–95
trade patterns and, 17, 108
See also Private investment; Stimulus spending in China
J
Japan, 1, 9, 14, 41, 58, 73, 119, 126, 127, 128, 133, 149, 152
China’s development course similar to, 217–18
current account balance, 226–27, 235f
demographic trends, 229–31, 231f
economic performance in expansion period, 224–31
exchange rate policy in 1980s, 220–22, 235f
financial sector liberalization in 1980s, 222–24, 223f
Great Recession in, 10–11
growth, 219, 219f, 220f, 224–25, 225f
income inequality in, 185–86
lessons from transition to service economy, 5, 217, 218, 231–40
macroeconomic policy in 1980s, 219–20
real estate market, 221–22, 237–38, 237f, 238f
regional trade, 110, 111
spillover effects of real estate investment in China, 137
transition to service economy, 227–29
unemployment rate in 1980s, 235f
urbanization, 230f, 231
K
Korea, Republic of, 58, 73, 117, 119, 126, 149, 152
regional trade, 110, 111
spillover effects of real estate investment in China, 137
L
Labor market
bargaining power of workers, 196
demographic patterns and trends, 20, 157, 161f, 162f, 163, 173
distribution of wealth and, 196
during economic growth in China and Japan, 228f, 229f
estimates of China’s potential output and, 50, 51
evolution of excess supply in, 165–73, 167f, 169f, 170f, 170t, 171f
goals of financial reform, 245
international comparison of employment growth, 245f
investment trends and, 39–40
migration restrictions and, 196
modeling methodology, 164–65, 175–77
participation rates, 171–72
policies to influence supply in, 173, 174
recent developments in, 159–63, 160f, 161f
services sector deregulation and, 269
shift to services sector, 232–33
unemployment rate in 1980s Japan, 235f
See also Lewis Turning Point; Total factor productivity; Wages
Land use rights, 183
Lehman Brothers, 10
Lewis Turning Point, 4, 20
definition, 157
demographic trends and, 157, 163
evidence for, 158
global implications, 159
implications for growth in China, 158–59
projected onset of, 157, 169, 170–74, 174
recent movement toward, 159–63
Louvre Accord, 222, 237
M
Macao, 62
Macroeconomic policies
goals of financial reform, 247
liquidity control, 243
in preparation for financial reform, 250–51
to support transition to service economy, 218, 219–20, 237–40
Malaysia, 117, 119, 127
Manufacturing sector, China’s
capacity utilization, 48, 57
corporate saving rate, 67
current sources of inefficiency in, 206
domestic demand, 15
future prospects for, 12–13, 13, 14, 15
implications of real estate investment decline for, 144–45
input costs, 19
inventories, 15
investment growth in, 115
lessons from reform of, 204–5
multinational corporations in, 206
private sector investment in, 15, 57, 58, 63, 63f
spillover effects of investment slowdown in, 119–22
total factor productivity in, 202
trade patterns, 12, 15
Manufacturing sector, Japan’s, 222
Metals and minerals markets, 126f, 127, 133, 133f, 134t, 135t, 137, 143t, 146, 150–52, 152f
Mexico, 191–92, 195
Middle class, 20, 186
Migrant labor, 85–86n, 159, 196
Mining, 12, 15. See also Metals and minerals markets
Monetary policy reform, 256–58, 268
Monopoly rights policy
benefits of de-monopolization, 204, 212–14
current coverage, 205–6, 207f
growth of manufacturing industry after reform of, 204–5
modeling methodology, 209–11
per capita income and, 203
price effects of, 203–4
total factor productivity and, 202–3, 213–14
Multinational corporations in China’s manufacturing sector, 206
N
Newly industrialized economies
distribution of wealth in, 185–86, 190–91
Non-accelerating inflation rate of unemployment, 50, 51, 53, 168
O
Okun’s law, 51
One Child Policy, 85, 95, 96, 170–71
P
Pension system, 18–19, 195, 269
Phillips curve, 50–51, 53
Plaza Accord, 220–21, 234
Policy reforms
to address wealth inequality, 4, 181, 182, 184, 192–99
benefits of de-monopolization, 204
to close output gap, 52
effects on total factor productivity, 202–3
to encourage competition, 202–3
future prospects, 19–20, 267
goals of, 18, 23, 57–58
implications for Lewis Turning Point, 158–59
to influence household saving and consumption, 81, 86, 88–89, 101–2, 103, 234
to influence labor supply, 173, 174
poverty reduction and, 183
private sector investment and, 57
for rebalancing, 268–70
response to Great Recession, 12, 14–15, 18–19, 51–52, 261
for transition to service economy, 218–19, 227–29
See also Financial reform
Poverty
access to finance and, 198
China’s growth as pro-poor, 186–88
patterns and trends, 181, 182–83, 182t, 183f, 191–92
Private investment
corporate saving and, 65, 65f, 66–68, 66f
cost of capital and, 68, 70–73
determinants of, 57, 58, 73–76, 74t, 75t
dividend payments and, 64–65, 65f, 66f
financing of, 64–65, 65f
by foreign-funded firms, 62
geographical distribution of, 57, 58, 63–64, 76
patterns and trends in, 15, 61
policy reform goals for, 57–58
returns to capital, 71–73, 72f
sectoral distribution of, 57, 58, 63, 63f, 76
state-owned enterprise investment and, 61–63, 62f
See also Investment patterns and trends
Private sector
current government involvement in, 205–6, 207f
distribution by firm ownership type, 62f, 79t
firm distribution by industry in, 78t
international comparison of structure of, 77–78t
See also Monopoly rights policy; Private investment
Privatization of housing stock, 86
R
Real estate investment, 4
backward linkages from, 139, 140f
commodity price outcomes of, 143t
cost of industrial land, 68
crisis risk from, 139
domestic spillover effects, 137, 139, 142t, 144–47, 146f, 152
effects on global trade, 143t, 144, 145f
future prospects, 137–39
global spillover effects of, 137, 139–40, 142t, 147–53
in Japan, 221–22, 237–38, 237f, 238f
market characteristics, 137
modeling spillover effects of, 139, 140–41, 153
patterns and trends, 137, 138f, 139f
private sector, 57, 58, 63, 63f
regulation and oversight, 137–39
share of fixed asset investment, 137, 138f
See also Housing market
Regulation
implementation of financial reforms, 258, 268
nonbank financial system, 244–45, 248–50, 268
preparation for financial reform, 251
Returns to capital, 71–73, 72f
Rural areas, 183, 198, 199
Russian Federation, 191–92
S
Saudi Arabia, 127
Saving. See Corporate saving; Household saving
Services economy, transition to
challenges for China in, 218–19
currency realignment to support, 220–22
exchange rate policy in, 234–36
financial liberalization in, 222–24, 236
Japan’s policies in, 227–29
lessons from Japan’s experience in, 5, 217, 218, 231–40
macroeconomic reforms to support, 219–20, 237–40
Services sector, China’s
deregulation of, for rebalancing, 269
lack of competition in, 205
total factor productivity, 202
See also Services economy, transition to
Social welfare programs, 19, 100
cash transfers, 195
public spending, 193–94, 195–96
Solar energy, 14, 205
State-owned enterprises, 64, 66, 71, 85n
benefits of manufacturing sector reform, 204–5
investment share of, 61–62
reform effects on household saving, 86, 90, 96–97, 97t
reform effects on labor supply, 167
Stimulus spending in China
effectiveness of, 15
infrastructure spending, 14–15, 115
outcomes in credit market, 244–45
response to Great Recession, 12, 14, 51–52
sectoral distribution, 63
state-owned enterprise investments and, 61–62
Stock markets, global spillover effects from
China, 127, 146, 150, 150f
Subsidies, 10
Supply chain networks, 107
effect of investment slowdown in China, 115, 149
implications of China’s status in, for regional economies, 110–12, 110f
vulnerability to investment slowdown in China in, 119
T
Taiwan Province of China, 62, 110, 111, 117, 119, 127
Tax policy and collection
China’s current, 193
recommendations for local government reforms, 269
strategies to reduce inequality, 193–95
Textiles trade, 12
Tibet, 63
Time-series modeling of current account, 24–25, 26t
Total factor productivity
benefits from gains in, 203–4
capital-to-output ratios and, 31, 34
determinants of China’s performance, 202–3, 208–9
estimates of China’s potential output, 49–52
future challenges for China, 158
growth of manufacturing sector after reforms, 204–5
inefficiencies in current manufacturing sector, 206–7
in labor market modeling, 165–66, 168
monopoly rights and, 202–3, 208–9, 213–14
prospects for improving, 201
recent patterns and trends, 173, 201–2, 203f
reform outcomes in labor supply, 173
sectoral distribution, 202
Trade
capacity utilization and, 57–58
causes of export market growth, 21, 110
China as source of regional final demand, 108–10, 108f, 109f
China as supply-chain hub for regional economies, 110–12, 116
China’s import demand, 108–9, 111–12, 112f, 113t, 115, 116f
contribution to current account imbalances, 18
current account modeling methodologies, 26–27, 27f
in estimates of China’s potential output, 50–51
future prospects for, 13, 15, 21, 113–14, 218
Great Recession and, 2, 13–14
implications of domestic imbalances for, 107
implications of real estate investment decline, 143t, 144, 145f
investment and, 17
market share patterns, 14, 21
patterns and trends, 1–2, 12, 13f, 15–16, 17, 21, 112f, 114, 115–16, 116f
regional comparison, 16f, 112f
regional significance, 116–17, 117f
spillover effects of consumption patterns in China, 122, 131–32t, 135t
spillover effects of investment patterns in China, 118–22, 120f, 121f, 127–28, 129–31t, 132–33, 149–50, 149f
World Trade Organization accession and growth in, 1
Transportation infrastructure, 48, 58, 63
U
Uncertainty, 39, 75, 76
United Kingdom, 73, 128, 149
United States, 1, 48, 73, 73n, 183
capital-to-output ratio, 61
China’s exports to, 13, 112
current account deficits in, 9, 10
Great Recession in, 10
imports from Asia, 113f
Plaza Accord, 220–21
wind energy industry of, 14
worker wages and productivity in, 201–2, 203f
Urbanization, 20, 58, 115, 163, 183, 196, 230f, 231
Utilities, 63
V
Vector autoregression modeling, 24, 122, 139, 140–41
W
Wages
elasticity of labor demand, 165
elasticity of labor supply, 166
Japan’s transition to service economy and, 229
labor market modeling techniques, 164–65, 168
in Lewis Turning Point model, 157
minimum, 196
recent developments, 159–60, 160f, 161f
returns to education, 193
trends in, 20, 196, 201–2, 203f
Water, 19, 68, 69f
Wind energy industry, 14, 205
World Economic Outlook, 21, 24
World Trade Organization, 1–2, 12, 129t, 202
X
Xizang Autonomous Region, 63
Z
Zhejiang Province, 63, 64f