Since the early 1980s, China has been undergoing a dramatic economic growth through the reform and opening-market policy. China’s economy acquired an outstanding achievement, precisely, it had kept a continuous annual growth rate exceeding 9% for 30 years (Zhang et al., 2012: 393). Moreover, China overtook Japan to become the second largest economy by measuring Purchasing Power Parity by the end of 2010 (Yao and Zhang, 2011: 206). However, in the meantime, during the period of transition of the Chinese economy, it appears a fact that countering the traditional finance-growth theory and research literature, specifically, a rapid economic growth with a low efficiency financial system. This essay will argue that poor financial system can promote speedy economic growth in China that differs from common findings in the empirical literature. This essay is organized as follows. Firstly, it will briefly introduce the Chinese financial system and its problem followed by examining the possible reasons of rapid growth. Finally, it will analyze the relationship of the Chinese financial system and economy through using AK model. China’s financial system involves two segments roughly, banking sector and stock market respectively. Even though China has a long history, the banking system was rarely built approximately 60 years ago. Before the transition in 1978, Chinese banking system was characterized by highly leading by unique bank which is the People’s Bank of China both in policy and commercial business (Guizot, 2007: 19). It also mentions that in the late 1970s, China re-established a new system which was divided commercial business work at Big Four stated-owned banks (“the Industrial and Commercial Bank of China, Agricultural Bank of Chi... ... middle of paper ... ...ment and Total Factor Productivity Growth: Evidence from Chinese Mainland Provincial Panel Data. Modern Economy, 2, 868-873. Yao, Y. and Yueh, L. (2009). Law, Finance, and Economic Growth in China: An Introduction. World Development, 37(4), 753-762, Yao, S. and Zhang, J. (2011). The World Financial Crisis and The implications for China. In P. Arestis, R. Sobreira and J., L., Oreior (eds. ), An Assessment of the Global Impact of the Financial Crisis. (pp.182-208). London: Palgrave Macmillan. Young, A. (2000). Gold into Base Metals: Productivity Growth in the People’s Republic of China during the Reform Period. Retrieved November 6th, 2013 from: http://www.stanford.edu/~klenow/Gold%20into%20Base%20Metals.pdf Zhang, J., Wang, L. and Wang, S. (2012). Financial development and economic growth: Recent evidence from China. Journal of Comparative Economics, 40, 393-412.
report of the national commission on the causes of the financial and economic crisis in
Look at the scenario Growth Rates. According to the rule of 70, how large will China’s real GDP per capita be in 20 years? A) $5,600 B) $8,000 C) $16,000 D) $28,000 6. Which of the following will NOT increase the productivity of labor? A) technological improvements B) an increase in the capital stock C) improvements in education D) an increase in the size of the labor force 7.
Eichengreen, B., Park, D., and Shin, K. (2011) ‘When Fast Growing Economies Slow Down: International Evidenceand Implications for China’. National Bureau of Economic Research Working Paper 16919. [Online] Available from: http://www.reod.zju.edu.cn/proimg/201142818212680.pdf [Accessed: 21st of October 2015]
If the development of Financial Market in America is like a sturdy adult, I would say the development of Financial Market in China is just like a child. The history of the U.S. financial market was established and has been growing over two centuries. For China, only twenty year has now passed since the financial market was built and growth. The Chinese financial market seems to be immature compared to the U.S. For example, China’s financial market does not have a thorough monitored stock market. The child is just starting to imitate the behavior and follow the step of the adult. However, the child is too young that mistakes always being made. On the other hand, since the child is in his early growth stage, a high level of growth is undertaking and a large progress might be attained. In today's China’s financial market, it is necessary for China to gather finance professionals in development of financial market. As a recent graduate student, working in the finance field less than a year, it is extremely hard for me in making a tiny positive effect on the growth of Chinese financial. However, to be engaged myself to the development of Chinese financial market is my long-term career goal.
Cabral, R. (2013). A perspective on the symptoms and causes of the financial crisis. Journal of Banking & Finance, 37, 103-117
Xingzhong, LI Daokui David YIN. "The International Monetary System in the Era of Post-Financial Crisis: What Policy Options Does China Have?[J]." Journal of Financial Research 2 (2010): 005
...st and stand in the world. It is predicted that China will one day be the largest economy growing country in world. They continually growing and rebalancing their world to be the best. The growth of economy will depend on the Chinese government comprehensive economic reforms that more quickly accelerate in China transition to a free market economy. The consumer demand, rather than exporting the main engine of economic growth; boost productivity and innovation; address growing income disparities; and enhance environmental. (Morrison, 2014,para2)
From the 1970s, there has been a wave of liberalization in China, which was introduced by Deng Xiaoping. This is one of the key reasons to the rise of China to be one of the economic giants in the world. In the last 25 years of the century, the Chinese economy has had massive economic growth, which has been 9.5 percent on a yearly basis. This has been of great significance of the country since it quadrupled the gross domestic product (GDP) of the country thus leading to saving of 400 million of their citizens from the threats of poverty. In the late 1970s, China was ranked twentieth in terms of trade volumes in the whole world as well as being predicted to be the world’s top nation concerning trading activities (Kaplan, 53). This further predicted the country to record the highest GDP growth in the whole world.
Kalirajan, K. P., M. B. Obwona, and S. Zhao. "A Decomposition of Total Factor Productivity Growth: The Case of Chinese Agricultural Growth before and after Reforms." American Journal of Agricultural Economics 98 (May 1996): 331-38. JSTOR.
The rise in China from a poor, stagnant country to a major economic power within a time span of twenty-eight years is often described by analysts as one of the greatest success stories in these present times. With China receiving an increase in the amount of trade business from many countries around the world, they may soon be a major competitor to surpass the U.S. China became the second largest economy, last year, overtaking Japan which had held that position since 1968 (Gallup). China could become the world’s largest economy in decades.
http://www.uoc.edu/symposia/caixamanresa/jornadaeconomia/eng/vicky_hu.pdf> Naughton, B (2007) The Chinese Economy: Transitions and Growth, Cambridge, Massachusetts: MIT Press. Stoltenberg, Clyde D. "China's Special Economic Zones: Their Development and Prospects. " Asian Survey. 6th ed.
Debt crisis is becoming common and faced by most citizens in Malaysia. Between June 1997 and January 1998 a financial crisis swept like a brush fire through the "tiger economies" of SE Asian. Over the previous decade the SE Asian states of Thailand, Malaysia, Singapore, Indonesia, Hong Kong, and South Korea, had registered some of the most impressive economic growth rates in the world. Their economies had expanded by 6% to 9% per annum compounded, as measured by Gross Domestic Product. This Asian miracle, however, appeared to come to an sudden end in late 1997 when in one country after another, local stock markets and currency markets imploded. When the dust started to settle in January 1998 the stock markets in many of these states had lost over 70% of their value, their currencies had depreciated against the US dollar by a similar amount, and the once proud leaders of these nations had been forced to go cap in hand to the International Monetary Fund (IMF) to beg for a massive financial assistance. (W.L.Hill, n.d.)
A variable for measuring financial deepening is credit to the financial sector. There are burgeoning empirical evidence to support the positive relationship between financial deepening and economic growth. However, McKinnon-Shaw school of thought identified policy implications that may hamper financial development and by extension economic growth to include government restrictions in the banking system through interest rate ceilings, high reserve requirements and directed sectoral credit programme. Arguing in favour of an efficient allocation of capital within an economy to foster economic growth, Levine (1997) observed that since the early 1990s, there has been growing recognition for the positive impact of financial intermediation on the economy. In a study conducted on financial development and economic growth in 77 countries, King and Levine (1993) found that banking sector development can spur economic growth in the long run and there exists a positive and statistically significant impact of growth rate in per capita real money balances on real per capita gross domestic product growth. Discussing on the role of banks in promoting economic growth, Beck (2003) says that banks play diverse roles in fostering economic development and fulfill the crucial role of mobilization
Banks sector is playing an important role in economies. The banking industry, as the classic and the most influential of financial intermediaries, facilitates economic operations. Financial sector in the worldwide country has been changes over these years by looking the changes of financial structure environment and economic conditions. Thus, banks are a very important point to financial system and play an important role as control and contribute growth to the economic sector.
Warwick J. McKibbin, and Andrew Stoeckel. “The Global Financial Crisis: Causes and Consequences.” Lowy Institute for International Policy 2.09 (2009): 1. PDF file.