A provincial view of global imbalances: Regional capital flows in China

Arbeitspapier

We model capital flows among Chinese provinces using a theory-based variance decomposition that allows us to gauge the importance of various channels of external adjustments at the regional level: variation in intertemporal prices-domestic and international interest rates and the real exchange rate-and intertemporal variation in quantities (cash flows of output, investment and government spending). We find that our simple framework can account for around 85 percent of the variation in regional capital flows over the 1985-2010 period. Our results suggest that the relative importance of private and state-owned enterprises, a province's level of integration into the world economy and its sectoral composition play an important role for external adjustment vis-à-vis the rest of China and the world. Specifically, we find strong empirical support for the view that differential access of private and state-owned enterprises to finance is a key driver of China's surpluses. We discuss implications of our results for global imbalances in capital flows.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 162

Classification and Topics

• Classification: Wirtschaft ; International Finance: General ; Current Account Adjustment; Short-term Capital Movements ; Macroeconomic Aspects of International Trade and Finance: General
• Subject: China ; Chinese provinces ; Capital flows ; Current account ; Global imbalances ; External adjustment ; Present-value models ; Regional business cycles

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cudré, Samuel ; Hoffmann, Mathias
• Event: Veröffentlichung
• (who): University of Zurich, Department of Economics
• (where): Zurich
• (when): 2014

Further information

• DOI: doi:10.5167/uzh-97029
• Handle: http://hdl.handle.net/10419/111223
• Last update: 10.03.2025, 11:43 AM CET