Nicholas R. Lardy

China's Embrace of Globalization

As China has become an increasingly important part of the global trading system over the past two decades, interest in the country and its international economic policies has increased among international economists who are not China specialists. This paper represents an attempt to provide the international economics community with a succinct summary of the major steps in the evolution of Chinese policy toward international trade and foreign direct investment and their consequences since the late 1970s. In doing so, we draw upon and update a number of more comprehensive book-length treatments of the subject. It is our hope that this paper will prove to be a useful resource for the growing numbers of international economists who are exploring China-related issues, either in the classroom or in their own research.

China in the world economy

China is playing a growing role in the world economy. It is one of the worlds fastest growing countries and is the tenth largest exporter. China is also a significant recipient of foreign aid and a major borrower on international capital markets. Even more significantly, it is attracting vast amounts of foreign direct investment--over

Foreign trade and economic reform in China, 1978-1990

11 billion in 1992 alone. * This study examines the implications of Chinas emergence as a major player in the world economy. Its integration into the international economic order poses major difficulties for the rest of the world. These problems include bringing Chinas mixed market/centrally planned economy into the GATT, adapting to competition from labor-intensive Chinese exports, encouraging further market-oriented reform, and accommodating its demand for international capital. But Chinas participation in the global economy also offers important opportunities for trade, investment, and international cooperation to promote world prosperity and stability. * Dr. Lardy anticipates that China will continue on a rapid growth path, thus magnifying the policy challenges and opportunities for its trading partners. He recommends a series of steps to facilitate Chinas full participation in the world economy.

The Role of Foreign Trade and Investment in China's Economic Transformation

Preface 1. Trade policy and economic development 2. The prereform foreign trade system 3. Reforming the foreign trade system 4. The efficiency of Chinas foreign trade 5. Integrated versus partial reforms Appendices References.

China's Exchange Rate Policy Dilemma

In the almost two decades since economic reform began in China the role of the foreign sector has burgeoned in ways that no one anticipated. The volume of foreign trade and the role of foreign capital are both far greater than could have been foreseen based on the modest Chinese economic reforms initiated in the late 1970s. By the mid-1990s China had become one of the worlds largest trading nations, the recipient of more foreign direct investment than any other country in the world, the largest borrower from the World Bank, the largest recipient of official development assistance in the form of low-interest, long-term concessionary loans from industrialized countries, and, except for the Czech Republic, the only transition economy with ready access to international capital and equity markets.

China's Role in the Revived Bretton Woods System: A Case of Mistaken Identity

This paper summarizes key aspects of China’s exchange rate policy, outlines the problems it creates for both China and the global economy, and proposes a feasible policy compromise.

Financial Repression in China

This paper argues that the way in which China is portrayed in the revived Bretton Woods thesis (BW2) is not consistent with several important trends in, and features of, the Chinese economy; nor does the strategy in the BW2 seem sensible for Chinas long-term economic development. Whether it is the behavior of Chinas real exchange rate, the costs of sterilizing large reserve inflows, the role that FDI plays in financing Chinas fixed asset investment, the participation of foreign firms in Chinas exports and in the ownership of export industries, or the political economy of trade protectionism in the United States, the BW2 does not provide a good explanation either for how China has behaved in the past or how it should behave in the future. We conclude that the BW2 does not provide a persuasive story for why large US current account deficits and undervalued Asian exchange rates can or should continue for the next decade or longer.

China and the Asian Contagion

The Chinese banking system has improved significantly over the past decade, but in one critical respect, it appears to have regressed. The Peoples Bank of China controls interest rates in a way that has led to significant financial repression--low and now negative real return on deposits--as inflation has risen in recent years. This distorted interest rate structure is a significant obstacle to further reform of the financial system and to sustaining Chinas rapid economic growth. Financial repression costs Chinese households about 255 billion renminbi (US

Centralization and Decentralization in China's Fiscal Management

36 billion), 4.1 percent of Chinas GDP, and a fifth of it goes to corporations, one-quarter to banks, and the government assumes the rest. Financial repression reduces the cost to the government of sterilized intervention to sustain Chinas undervalued exchange rate relative to the cost it would face if interest rates were liberalized. But the financial repression that facilitates an undervalued exchange rate imposes substantial, if partially hidden, costs on Chinas economy. It has led to lending rates that are far too low, resulting in excess demand for bank loans and increased use of quantitative targets to control credit growth. These have led to a less efficient allocation of capital through the banking system and to a huge underground financial market. Financial repression is also contrary to the governments long-term goal of developing a commercial banking system. It has also depressed the growth of household income, undermining the governments goal of transitioning to a growth path that relies less on investment and net exports and more on domestic consumption. Finally, financial repression seriously hinders the development of a fully and efficiently functioning capital market.

Consumption and Living Standards in China, 1978–83

The Asian financial contagion has so far left China largely unaffected. Unlike the plummeting currencies elsewhere in the region, the renminbi has appreciated against the U.S. dollar since the onset of the crisis. In real terms the Chinese economy has also fared well. In 1997 the growth of gdp, while slower than the blistering pace of the immediately preceding years, was almost 9 percent. Inflation was at a 5-year low. Exports grew over 20 percent in 1997, contributing to an unprecedented