Currency concerns under uncertainty: The case of China

Arbeitspapier

The recent declines in China's financial account balance ended the twin surplus era and led to a modest decline in the stock of official reserves, which reflects a reversal in expectations for the Chinese currency. Negative balances, which have been visible in China's financial balances since the last quarter of 2011, have heightened fears/anxiety in markets. These deficits stand in sharp contrast to the typical financial account surplus that existed until 2010. The announcement in September 2011 by Chinese monetary authorities of a two-way floating RMB in the foreign exchange market has unsettled market expectations and has led to a sharp fall in the financial balance. The latter brought a change in the expectations regarding the RMB-USD exchange rate. This change was reflected in the drop in foreign exchange assets, which was caused by a jump in short-term trade credits to prepay (for imports) in dollars, a rise in dollar advances from banks, and a withdrawal of dollar deposits. These changes have, of late, been a cause of concern relating to the future of China's economic relations vis-à-vis trading and financial partners, which include the United States. The experience of China, in a changing world beset with deregulation and with speculation affecting her external balance in recent years, provides further confirmation of John Maynard Keynes's observation, in 1937, regarding uncertainty in markets: About these matters there is no scientific basis on which to form any calculable probability whatever. We simply do not know.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. 761

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Price Level; Inflation; Deflation ; Monetary Policy ; International Policy Coordination and Transmission ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance ; Economywide Country Studies: Asia including Middle East
• Thema: China ; financial balances ; official reserves ; twin surpluses ; rebalancing ; expectations ; internationalization ; managed exchange rate

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Sen, Sunanda
• Ereignis: Veröffentlichung
• (wer): Levy Economics Institute of Bard College
• (wo): Annandale-on-Hudson, NY
• (wann): 2013

Weitere Informationen

• Handle: http://hdl.handle.net/10419/79450
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ