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on China |
| By: | Chen Xiang Liu |
| Abstract: | China’s current financial structure does not give sufficient support to rural areas, leaving many farmers and rural businesses without the capital they need to develop. Rural finance is the weakest point in the country’s entire financial system. Low profits for rural financial institutions, a lack of rural financial products and services and the difficulty many farmers experience in securing loans are the main problems plaguing the rural financial system. Accelerating rural financial reform and making it easier for rural people to access capital are key parts of the country’s effort to reform its overall financial system, to resolve “Three Rural Issues (San Nong)(1)” (Agriculture, Countryside, Farmers), and to create “new socialist countryside”. The main objectives of this paper are to (i) examine the current status of rural finance’s demand and supply and identify existing issues and constraints; (ii) evaluate ongoing rural financial reform and explore suitable roadmaps to develop a well-functioning and sustainable rural finance system, which would address the diverse needs of “new socialist countryside” construction. (1) San nong literally means three “nong”. The word “nong” in Chinese is combined with other words to form phrases such as nongye (agriculture), nongcun (villages or countryside), and nongmin (farmers or peasants). |
| Keywords: | banks, microcredit institutions, agricultural insurance, informal finance |
| JEL: | G21 G22 Q14 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2008-43&r=cna |
| By: | Ruan, Jianqing; Zhang, Xiaobo |
| Abstract: | "Traditional economic theory posits that a well-functioning capital market is a necessary condition for industrialization and economic growth. In reality, micro and small enterprises are ubiquitous because entrepreneurs can undertake low-return activities with minimal barriers to entry. Using a cashmere sweater cluster in China as an example, this paper shows that organizational choice can overcome the prohibitive cost of investment. When facing credit constraints, firms are more likely to concentrate in divisible production technologies in the form of industrial clusters. Within clusters, a vertically-integrated production process can be decomposed into many small incremental stages that are more accessible for the small entrepreneurs widely available in rural China, thereby supporting industrialization even in the absence of a well-functioning capital market. The observed rate of returns to capital is closely related to the organizational choice under credit constraints." from authors' abstract |
| Keywords: | Industrialization, Entrepreneurship, Credit, Capital markets, organizational choice, Non-farm development, |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:830&r=cna |
| By: | Reuven Glick; Michael Hutchison |
| Abstract: | In recent years China has faced an increasing trilemma—how to pursue an independent domestic monetary policy and limit exchange rate flexibility, while at the same time facing large and growing international capital flows. This paper analyzes the impact of the trilemma on China’s monetary policy as the country liberalizes its goods and financial markets and integrates with the world economy. It shows how China has sought to insulate its reserve money from the effects of balance of payments inflows by sterilizing through the issuance of central bank liabilities. However, we report empirical results indicating that sterilization dropped precipitously in 2006 in the face of the ongoing massive buildup of international reserves, leading to a surge in reserve money growth. We estimate a vector error correction model linking the surge in China’s reserve money to broad money, real GDP, and the price level. We use this model to explore the inflationary implications of different policy scenarios. Under a scenario of continued rapid reserve money growth (consistent with limited sterilization of foreign exchange reserve accumulation) and strong economic growth, the model predicts a rapid increase in inflation. A model simulation using an extension of the framework that incorporates recent increases in bank reserve requirements also implies a rapid rise in inflation. By contrast, model simulations incorporating a sharp slowdown in economic growth lead to less inflation pressure even with a substantial buildup in international reserves. |
| Keywords: | Monetary policy - China |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:2008-32&r=cna |