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.
The financial crisis of 2007–2008 is considered by many economists the worst financial crisis since the Great Depression of the 1930s. This crisis resulted in the threat of total collapse of large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world. The crisis led to a series of events including: the 2008–2012 global recessions and the European sovereign-debt crisis. The reasons of this financial crisis are argued by economists. The performance of the Federal Reserve becomes a focal point in this argument.
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.
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When the new Chinese Government was set up in 1949, the new government faced a lot of problems. First on their agenda was how to re-build the country. As Communist Party of China (CPC) is a socialist party, their policies at the time were similar to that of the Soviet Union’s. Consequently, the CPC used a centrally planned strategy as its economic strategy when it first began. For a long time, the Chinese economy was a centrally planned economy in which none other than the state owned all companies. In fact, there were absolutely no entrepreneurs. As time went on, the problems of a centrally planned economy started to appear, such as low productivity, which was the key reason for restricting the development of China. With the population growing, the limitations of the centrally planned economy were clear. In 1978 China started its economic reform whose goal was to generate sufficient surplus value to finance the modernization of the Chinese economy. In the beginning, in the late 1970s and early 19...
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.
...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)
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
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.
It is a known fact that the banking industry plays a huge role in today’s society, the industry has grown rapidly of many decades and still growing. The banking sector is that sector of the society that is actually responsible for the handling of financial assets for other sector of the economy, they do this by investing the financial assets in order to create more wealth in the society while regulating all the activities involved in the process. (What is the banking Sector 2015)
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.