Burdekin Richard C.K.. China’s Monetary Challenges: Past Experiences and Future Prospects. Cambridge University Press,2008. — 272 p.. 2008

Despite the People's Republic of China's remarkable growth over the post-1978 reform period, questions have arisen about the sustainability of its exchange rate policy and the soundness of its financial system. This book focuses on the key monetary challenges to China's continued advancement and addresses such topical issues as the buildup of foreign exchange reserves, monetary control, credit allocation difficulties, and the expanding role of China's asset markets and stock exchanges. Current and past monetary policy strategies are examined in detail, as are the banking sector reforms leading up to fuller foreign competition after December 2006. The analysis also assesses the People's Republic's role within Greater China (including Hong Kong and Taiwan) and the potential for future renminbi monetary hegemony within Asia. The treatment of these issues is intended to be accessible to non-economists and does not assume prior immersion in the underlying formal models.

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Contents

Preface

INTRODUCTION

China Today and Lessons from the Past

PART ONE CHINA'S EXCHANGE RATE REGIME AND MONETARY POLIC

The Renminbi-US Dollar Exchange Rate Controversy

Renminbi's further appreciation is megatrend... (Wu Xiaoling, Vice Governor of the People's Bank of China, 2005)1

Introduction

The Evolution of the People’s Republic’s Exchange Rate Policy

Pressures for Depreciation and Appreciation Since 1994

Exchange Rate Expectations, Capital Flows, and Pressure for Appreciation

Doubts as to the Question of Renminbi Undervaluation

Post-2005 Developments and Future Prospects

TWO China’s Reserve Buildup and Global Imbalances

[The International Monetary] Fund should focus its surveillance on the systematically important countries issuing major reserve currencies.

Introduction

The United States vs. China

Would Renminbi Appreciation Really Help the US Trade Balance?

Reserve Accumulation and the InternationalRole of the Dollar

Cautionary Lessons from Japan and Taiwan

Where We Stand Today

THREE Combatting Inflation and Deflation

Beijing is preparing to step on the brakes - Chinese style. The 10 per cent annualized growth in first quarter domestic product came on the back of surging liquidity.

Introduction

Early Methods of Inflation Control

Repressed Inflation in the Pre-Reform Period and After

Inflationary Pressures in the 1980s and 1990s

Control Measures Old and New

Confronting Deflation and the Asian Financial Crisis in the Late 1990s

From Deflation to Renewed Inflationary Pressures After 2002

FOUR People’s Bank of China Policymaking and External Pressures

with Pierre L. Siklos1

Introduction

Evolution of the People’s Bank and Its Monetary Policy Tools

Modeling People’s Bank of China Policymaking

Estimation Results

Conclusions

PART II THE IMPORTANCE OF INTERNATIONAL

FACTORS, PAST AND PRESEN

FIVE US Pressure on China and Hong Kong in the 1930s

At a time when other countries have been depreciating their monetary units..., China, whose currency is on a metallic basis, has seen the value of its monetary unit steadily appreciate...

Introduction

China’s Vulnerability

The Chinese and Hong Kong Experiences Compared

Causal Effects of the Silver Purchase Program on China

Conclusions

SIX Inflation Transmission to Taiwan in the 1940s

with Hsin-hui I. H. Whited[93]

Introduction

Imported Inflation and Mainland China’s Currency Reform

Time Series Analysis

Concluding Comments

SEVEN WTO Challenges and China’s Banking Sector Today

with Emily Kochanowicz1

Introduction

Overview of the Banking Landscape

The Changing Role of the Big Four State-Owned Banks

The 1997-1998 Reforms[111]

The Operations of the Asset Management Companies

Did State-Owned Bank Behavior Really Change After 1998?

Foreign Competition, Public Listing, and WTO Entry

Remaining Problems and Future Prospects

PART III THE PEOPLE'S REPUBLIC'S ROLE WITHIN GREATER CHINA AND ASI

EIGHT Asset Market Expansion and Shanghai vs. Hong Kong Listings of Chinese Firms

with Gregory C. Arquette and William O. Brown, Jr)

Introduction

Bond Market Development

Equity Markets

Speculative Pressures in the Equity and Real Estate Markets

Shanghai vs. Hong Kong

Assessing the Determinants of the Hong Kong Discount

Conclusions

NINE Economic Interdependence with Taiwan

with Hsin-hui I. H. Whited[151]

Introduction

The Growing Importance of Cross-Strait Linkages

Comparative Trends in Taiwan’s Macroeconomy

Empirical Evidence on the Relationship Between the Mainland China and Taiwan Macro Variables

Conclusions

TEN Conclusions and Future Prospects for the Renminbi

On the condition that the [renminbi’s] convertibility is realized, the Hong Kong dollar maybe pegged to the [renminbi] instead of the dollar in the future. (Donald Tsang, Chief Executive of the Hong Kong regional government, May 2006)1

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