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The People’s Bank of China (PBC) was among the first in the world to start exploration of central bank digital currency (CBDC) and will probably be one of the first major central banks releasing it...

This paper offers a comprehensive review and careful assessment of China's mobile payment business. With broad access, low costs, and reliable transactions, mobile payments are creating a revolution of financial inclusion, changing people's daily lives and commercial business models. This study also confirms that mobile payment improves risk sharing among individuals and increases entrepreneurial opportunities. These mobile payment successes can be traced to three key factors: supply shortages of alternative payment services, a friendly regulatory environment, and recent technological developments. A number of outstanding issues remain, however, including data ownership, data inequality, and regulatory shortcomings.

Financial technology (fintech) is rapidly transforming the economy as well as the financial landscape in China. This paper attempts to shed light on its contributing factors, current state, economic impacts and potential risks. We identify three key drivers for China’s fintech development, namely shortage of supply in formal financial market, strong government support for promoting financial inclusion through digital technology, and more ‘tolerant’ regulatory environment. The greatest value of the Chinese fintech sector is promotion of financial inclusion, enabling a vast number of small- and medium-sized enterprises (SMEs) and low-income households to access to financial services. Existing studies unveil some strong evidences of fintech development improving efficiency, increasing employment and supporting entrepreneurship. In the meantime, there are also serious challenges facing this sector, such as regulatory uncertainties, illegal transactions, data abuse, etc. We conclude the paper by presenting some key takeaways, including several lessons for financial regulation.

I would like to talk here about economic structure. In my contact with the market, I have noticed that many people are rather pessimistic about the current economic structure, even as stock prices are shooting up. Very often I have discussions with others about why China’s stock market has not been doing so well, and I have thereby come to the conclusion that it is because our economy has not been good enough. Now our own stock is actually on the upswing, but the reason remains the same: a lot of money has flown into the stock market because our economy is not good enough. This is a bit cheeky, but it does, nevertheless, convey profound messages.

We provide a first view of vulnerable informal economy after the blows from COVID-19, using transaction-level business data of around 80 million offline micro businesses (OMBs) owners from the largest Fintech company in China and employing machine learning method for causal inference. We find that the OMBs activities in China experienced an immediate and dramatic drop of 50% during the trough. The businesses had rebounded to around 80% of where they should be seven weeks after the COVID-19 outbreak, but had remained at this level until the end of our time window. We find a larger disruption to the OMBs in urban areas, the female merchants and the merchants who were not grown up in the places where they conducted businesses. We discuss the implications for policy support to the most vulnerable, and highlight the importance to take full advantage of digital development to follow up the informal economy.

Although infrastructure and innovation play important roles in fostering a country's economic growth, discussion in the literature about how the two are connected is limited. This paper examines the impact of road density on firm innovation in the People's Republic of China. The analysis uses a matched patent database at the firm level and road information at the city level. Regional variation in the difficulty of constructing roads is used as an instrumental variable to address the potential endogeneity problem of the road variable. The empirical results show that a 10% improvement in road density increases the average number of approved patents per firm by 0.71%. Road development spurs innovation by enlarging market size and facilitating knowledge spillover.

Should China continue to open its financial system? Our answer to this question is positive since financial opening is necessary for supporting economic innovation, containing financial risks and p...

In the lead‐up to China's five‐yearly National Party Congress late in 2017, attempts to resolve conflicts between short‐term growth and structural reform have tended to favour immediate growth. The new model of growth requires new economy sectors to grow much more rapidly than traditional (post‐1978) sectors. For a while, this was proceeding well, but in late 2016 and during 2017 there have been signs of priority for growth and therefore traditional sectors over the new economy. Favouring growth over reform introduces risk into longer‐term growth prospects.

In 2012, the Chinese government announced Two Centennial Goals. The first is to double the 2010 GDP and per capita income for both urban and rural residents by 2021, the year when the Chinese Commu...

© 2016 by the Earth Institute at Columbia University and the Massachusetts Institute of Technology. From a data set of Chinese firms in the 200507 period, we find that government investment boosted the performance of zombie firms and crowded out the growth of private firms; we also found that the higher the concentration of state banks (and of state-owned enterprises), the more conducive is the environment for nurturing zombie firms. With the exit of zombie firms, (a) the industrial output growth rate would be higher by 2.12 percentage points, (b) the capital accumulation rate would be higher by 1.4 percentage points, (c) the employment growth rate would be higher by 0.84 percentage points, and (d) the rate total factor productivity growth would be higher by 1.06 percentage points. Our results support a radical change in the way that government investment has been carried out, and support comprehensive reform of the state sector, but they do not necessarily argue against government investment in large infrastructure projects and strategically-critical areas.

Internet finance, which is often referred to as “digital finance” and “Fintech” outside China, was coined by Ping Xie and Chuanwei Zou (2012). According to Guidelines for Promoting the Healthy Deve...

The Belt & Road Initiative is China's greatest international economic ambition, aiming at stimulating economic development in a vast region covering sub regions in Asia, Europe and Africa, which accounts for 64% of world population and 30% of world GDP. The Initiative is devised to reconfigure China's external sector in order to continue its strong growth. While infrastructure development plays a central role, the Belt & Road Initiative is a comprehensive one, including also policy dialogue, unimpeded trade, financial support and people-to-people exchange. It is too early to assess the impact of this ambitious Initiative. It certainly has the potential of turning the underdeveloped “Belt & Road” region into a new vibrant economic pillar and contributing to economic policy thinking by incorporating successful experiences of emerging market economies. However, the Initiative also faces very high barriers, including lack of central coordination mechanism, potential clash of different political regimes and beliefs and financial viability of cross-border projects.

Employing two World Bank survey datasets of small- and medium-sized enterprises (SMEs), we investigate whether ownership discrimination exists in Chinese banks’ credit allocation. By comparing firms’ credit demand and loan availability, we identify two types of credit-rationing, self- and bank-rationing. We find that more than half of potential borrowers are credit-rationed, most of which is due to self-rationing. While several firm characteristics and macro-financial factors are important in determining chances of credit-rationing, there is no evidence to support the popular assertion of ownership discrimination in credit allocation in China. This also suggests that ownership reform alone is not sufficient for alleviating SMEs’ funding difficulties.

China's recent removal of the last ceiling restriction on deposit rates in October 2015 is a milestone in interest rate liberalization, but not the end of it. International experience suggests that, without structural and quantitative reforms, simply freeing interest rates can result in major financial stress. Before China's central bank can completely relinquish implicit or explicit guidance for commercial banks' interest rate determination, it needs to accomplish two tasks: improvement of commercial banks' pricing capability as well as the monetary policy transmission mechanism. Both tasks require significant reform measures to be initiated, such as enforcing market discipline, forming a new monetary policy framework, developing money and capital markets, abandoning quantitative restrictions on credit and reforming the financial regulatory system.

China is currently the third largest country in terms of outward direct investment (ODI), with the investors mainly being state-owned enterprises. This presents a question: What inhibits private enterprises from increasing ODI? Using a firm-level panel data set for Zhejiang Province in China, we examine the impact of firm heterogeneity on private firm ODI. We have three main findings: first, a higher productivity level contributes to better access to ODI, and increases ODI value as well; second, lowering a firm's financial constraint level can increase both the probability and volume of ODI; third, productivity cannot offset the negative effect of financial constraint on private firm ODI.

Can China continue its relatively rapid economic growth and rise to the high-income status in the coming decade? In this article we address this question by examining three issues. One, is the current slowdown mainly a cyclical or a structural phenomenon? Two, can China successfully transform its growth model? And, three, what does China need to do to foster its capability of technological innovation and industrial upgrading? We conclude that, with necessary reforms, such as improvement in the education and research capability, liberalization of the financial system and introduction of a more transparent and accountable political system, China will most likely be able to escape the middle-income trap in the next 10 years.

The historical determinants of modern economic development have been widely studied since the seminal work of Engerman and Sokoloff (1997, 2002) and Acemoglu et al. (2001, 2002). The literature is largely based on the former European colonies, especially in Africa. Notwithstanding China’s long and rich history, its long-term effect on modern day development, particularly financial development, remains under-researched. The shocks experienced by China provide important settings for future research in that many of them were sufficiently severe and traumatic for their effects to be detectable today and for them to have an effect on the development of the country even now.

This paper analyzes the effects of foreign bank entry on industrial efficiency in the People's Republic of China (PRC) as a case study of financial opening. The study reveals an overall positive impact on the industry. However, the effects vary across ownership groups: negative for state and collective sectors, positive for private enterprises, and insignificant for foreign-invested firms. These findings are incompatible with predictions based on the “cream-skimming effect” and information asymmetry. We investigate two transmission channels of the policy effects—via an easing of financing constraints and through increased competition. Foreign bank entry, like financial liberalization, reverses the effects of repressive financial policy, which protects the state sector but discriminates against private enterprises. While enhancing bank competition can be an effective way to support private sector development, the state sector deserves close attention in order to ensure a smooth transition. This case study should offer some useful lessons for future financial opening.

In recent years, the authorities in the People’s Republic of China (PRC) have made great efforts to internationalize its currency. Will Renminbi (RMB) finally become a reserve currency? This paper addresses the above question from an institutional analytical framework. We find that if only economic fundamentals are used in the prediction, the expected share of the RMB in global currency reserves could reach 10% at the end of 2011. However, if institutional variables are included, the predicted share comes down to around 2%, which is a more realistic prediction. The work then proposes reform actions in developing China’s institutional environment so as to facilitate the RMB to realize the 10% potential. In general, we believe that the RMB’s international role should increase in the coming years, but it will take a relatively long period before it plays the role of a global reserve currency.

The association between maxillary protraction and bone graft in patients with cleft lip and palate remains unclear. The purpose of this study was to investigate whether a secondary alveolar bone graft influences dentoskeletal effects of facemask therapy in unilateral cleft lip and palate patients with a skeletal Class III relationship.In this prospective nonrandomized clinical trial, 61 consecutive boys with unilateral cleft lip and palate and skeletal Class III malocclusion were divided into 3 groups: grafted facemask group (n = 21), ungrafted facemask group (n = 20), and untreated control group (n = 20). Sixteen dentoskeletal measurements on lateral cephalometric radiographs were compared before and after therapy or observation with 1-way analysis of variance or the Mann-Whitney U test.After facemask therapy, the grafted group showed a statistically significantly greater advancement of Point A (S-Vert-A, 4.18 ± 1.94 mm; SNA, 3.51° ± 2.21°) than did the ungrafted group (S-Vert-A, 2.64 ± 1.58 mm; SNA, 1.92° ± 1.05°). Furthermore, significant SNB changes were found in the grafted group when compared with those in the ungrafted group (-0.38° ± 1.77° vs -1.69° ± 1.34°; P 0.05). The changes in the mandibular plane angle (MP-SN, MP-FH) in the grafted group were less pronounced than in the ungrafted group by approximately 2° (P 0.05). Flaring of the maxillary incisors was more pronounced in treated subjects than in untreated subjects. The mandibular incisors proclined in both grafted (1.54° ± 4.21°) and control (0.97° ± 3.71°) patients, and were retroclined in the ungrafted group (-2.13° ± 3.68°).Facemask therapy performed after an alveolar bone graft produced more anterior maxillary migration (90%) and less pronounced mandibular clockwise rotation (10%) than those in the ungrafted group (50%, 50%, respectively).

This paper explores the empirical question of whether Chinese stock and property markets are integrated or segmented. We find that, at the national level, investment returns in property and the A-share markets were co-integrated in the long run. In the short run, property price Granger caused A-share prices, but not vice versa. However, the B-share prices were negatively correlated with property prices. Furthermore, the linkage between city-level property prices and stock prices showed significant variations across the country. These findings reveal that property and stock markets were integrated at the national level but the property markets were reasonably segmented among cities. They suggest that investment portfolios pursuing risk diversification should include both A and B shares and properties from different cities.

Boosting consumption has been a policy strategy for rebalancing the Chinese economy. The official statistics, however, show persistently declining consumption as a share of GDP during the past decade. In this paper, we provide a more complete picture of Chinese consumption by piecing together data from official and unofficial sources. Our estimations suggest that the consumption share rebounded from 2008, after a period of decline. This may provide the first piece of evidence that the rebalancing of the Chinese economy is already under way as a result of changes in factor markets, especially rapid increase in labor income, that have resulted in increases in household income as a share of GDP and improvement in income distribution across households. © 2013 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

1. Demographic transition, demographic dividend, and Lewis turning point in China Fang Cai 2. Discussions on potential bias and implications of Lewis turning point Yang Du and Wang Meiyan 3. The rise of labor cost and the fall of labor input: Has China reached Lewis turning point? Wang Meiyan 4. Has China passed the Lewis turning point? A structural estimation based on provincial data Yang Yao and Ke Zhang 5. The Lewis turning point of Chinese economy: Comparison with Japanese experience Ryoshin Minami and Xinxin Ma 6. Macro-economic implications of the turning point Ross Garnaut 7. What does the Lewis turning point mean for China? A computable general equilibrium analysis Yiping Huang and Tingsong Jiang 8. Will Chinese growth slow after the Lewis turning point? Ligang Song and Yongsheng Zhang

This article examines the impact of financial repression on economic growth during China's reform period. The aggregate financial repression index suggests that China's financial liberalization has been steady but gradual. Empirical estimation confirms that, on average, repressive policies helped economic growth, thanks probably to the prudent liberalization approach. But the impact turned from positive in the 1980s and the 1990s to negative in the 2000s, suggesting rising efficiency losses in recent years. Specifically, we find that lending to the state sector, interest rate regulation and capital account control were the main factors constraining China's economic growth in recent years.

Chinese outward direct investment (ODI) appears to differ from that of advanced economies. Is there a unique China model? By reviewing industry distributions of ODI data for 2003–2009, we found that Chinese ODI was not concentrated in industries that performed well either in exporting or domestically. Statistical analyses also confirmed that traditional variables, such as market size, production cost and legal environment, did not impact Chinese investors' choice of location for ODI. Instead, investors selected places where they could either learn advanced technologies or secure stable commodity supplies. We have tentatively concluded that the main purpose of the China model of ODI has not been to expand production overseas but to strengthen industries at home.

China's large current account surpluses not only destabilize its own macroeconomic conditions, but are also a focal point for global rebalancing discussions. Existing explanations by the literature fail either to account for the recent surge or to offer actionablepolicy responses. In this study, we propose an alternative hypothesis: asymmetric market liberalization and associated cost distortions. These distortions are producer subsidy equivalents, which contributed to both extraordinary growth performance and the growing structural imbalances. Our rough estimates of such factor cost distortions offer some explanations for recent movements of the current account. We argue that China needs to adopt a comprehensive reform package to rebalance its economy.

We apply a computable general equilibrium framework to assess likely impacts of the Lewis turning point (LTP) on China and the rest of the world. Modeling results suggest that China will probably transition from an abnormal economy to a normal economy with somewhat lower growth but higher inflation, which requires significant revision to the macroeconomic policy framework. China would lose competitiveness in labor-intensive activities, its current account surplus should fall but overinvestment risk could rise. These changes in China should help improve other countries' current accounts and boost low-cost countries' production. The LTP, however, does not provide automatic solutions to some of the key challenges, such as service sector development and innovation capability. China will need to make serious policy efforts to avoid the so-called ‘middle-income trap’.

The growth model of the People’s Republic of China has been based on high investments, exports, low-cost advantage, and government interventions. This model has successfully transformed the country from a low-income to an upper middle-income economy. However, the model has generated contradictions that could undermine future growth. Making the transition to high income requires greater reliance on efficiency and productivity improvement, innovation, and market competition. This book examines the challenges faced by the People’s Republic of China in sustaining robust growth, and policy options for making a successful transition to a high-income economy to avoid getting caught in the middle-income trap.

This paper describes the economic implications of the SARS outbreak that hit many Asian economies in spring 2003. Without a workable diagnostic test and a treatment for the illness, surveillance and quarantine were the key weapons against SARS last year. In general, risks are greater in countries with poor public health care, poor sanitation systems, high mobility, or high population density. During the height of the SARS outbreak, we estimated that the total costs of the epidemic would be about 1.5 percent of GDP for China. Better-than-expected containment of the virus reduced the impact to only about 0.5 percent of GDP. The experiences of the SARS outbreak point to the strong need to improve both the public health system and the governance structure in Asia.

Chinese banks suffer from serious financial fragility manifested by high proportions of nonperforming loans and low capital-adequacy ratios. A key policy introduced recently by the Chinese government to reduce financial risks is the establishment of four asset management companies (AMCs) for dealing with bad loans. Drawing on the experiences of the Resolution Trust Corporation in the United States and bank restructuring in the Central European transition economies, we argue that the original AMC design will not be successful in resolving the existing nonperforming loans, nor will it prevent the creation of new bad loans. We recommend a modification of the current proposal that redefines the relationships between the parent banks and the AMCs by transferring the deposits of problem enterprises along with their nonperforming loans from parent banks to AMCs.

It has been acknowledged in the literature that productive efficiency in grain production in China has substantially improved in the post-reform period, particularly in the early 1980s. Since then, there have been several policy changes in China, which have affected the growth of the sector. Specifically, the spectacular growth of rural industries has attracted significant physical and human capital from agriculture. It is in this context that Brown's warning of China soon becoming the world's number one importer of grain has raised an important question of whether China has reached its grain production potential. Analysis of the 1994 farm household survey data indicates that the majority of the sample farmers is reasonably technically efficient in grain production but that productivity can be increased further even with the existing technology.

APEC is an important forum for China to show its commitment to economic openness. Concerted trade liberalisation in the APEC region reduces the adverse terms of trade effect of China's own trade liberalisation. These help maintain the momentum of reform by reducing domestic resistance. APEC is not a stepping stone to WTO membership, but it gives China an opportunity to rally international support for its early entry into the WTO. However, APEC cannot substitute for WTO membership. This is not only because the WTO framework provides greater security for market access for Chinese exports as well as potentially larger gains to the Chinese economy, but also because it imposes legal bindings on China's trade policy once it becomes a member. In facilitating China's trade liberalisation, APEC and the WTO seems to be mutually re-enforcing. APEC prepares China for the WTO and the WTO accession pushes China to go along with the APEC process. Both APEC and WTO accession push forward domestic reform.

This study investigates whether China has achieved its potential in grain production fully with the existing technology. A stochastic varying coefficients frontier approach is applied on recent household survey data of 1000 grain farmers covering the periods 1993–1995. The results indicate that, on average, the actual grain outputs are about 15–35% lower than the potential output. The analysis has identified households' human capital stock, land size and market-oriented reform as important factors contributing positively to grain production efficiency.

Since the publication of Brown’s book, enormous interest in the issue has been generated among policymakers and scholars around the world. This surge in interest coincided with the sharp rises in world food prices in the year to June 1996 following on from harvest shortfalls in several grain-producing regions around the world. With the slowing of grain output growth since the mid-1980s, Chinese policymakers have been particularly concerned about food security. Brown’s dire prediction has aggravated their concern.

While China's open-door policy has benefited the world economy, there are anxieties, both in China and abroad, about increased competition and the cost of dramatic adjustments. This paper attempts to analyse the implications of China's trade reform for structural change and welfare in China and the rest of the world. Three sets of experiments are implemented with the GATP model. The study finds that China is the biggest gainer from its own liberalization, its labour-intensive sector will expand but other sectors, including agriculture will contract. The structural adjustment for other countries is likely to be concentrated on the clothing sector. But the economies which experience the biggest adjustments are also the biggest gainers. Multilateral trade liberalization, such as the APEC free trade process, increases the gain both for the rest of the world and for China.

This paper examines the impact of the various reform measures on the productivity performance of China's state enterprises. The study applies a Griliches-type production function and uses an enterprise panel data set collected between 1980 and 1992 in four coastal cities. It is found that while some policies such as reductions in the proportion of planned output and the introduction of the contract system improved productivity, the overall size of reform effects on productivity has been negligible. J. Comp. Econom., February 1997, 24 (1), pp. 65–78. National Centre for Development Studies, The Australian National University, Canberra, ACT 0200, Australia.