China's Financial Transition at a Crossroads by Calomiris Charles;

Author:Calomiris, Charles;
Language: eng
Format: epub
Tags: BUS000000, Business and Economics/General, HIS050000, History/Asia/Central Asia
Publisher: Columbia University Press
Published: 2007-08-01T00:00:00+00:00

GROWTH DETERMINANTS AND CHINA

CHRONOLOGY AND SUMMARY DATA

Any examination of China’s growth experience must start with a detailed examination of the country’s history. Table 4.1 presents a chronology of important economic, political, and financial events over the past 25 years in China. While the Prasad and Wei chronology in appendix 2 focuses on important events related to the capital account in China, our chronology puts more focus on the equity market and broad macroeconomic events that affect financial development. We also pay special attention to regulatory events. The chronology is drawn from Bekaert and Harvey (2005) and details important events such as the dates when price fluctuation limits and stamp taxes changed, the formation of the China Securities Regulatory Commission (CSRC), and the introduction of A and B shares.

Figures 4.1–4.4 provide some summary analysis of China’s growth experience. Figure 4.1 shows the time-series of real GDP and consumption growth. The growth rates are astounding. Since 1980, the lowest GDP growth rate has been 2.2 percent (in 2000). The average growth rate over this period is 7.8 percent. Consumption growth has averaged 7.0 percent; yet GDP growth and consumption have diverged in the last three years. During this period, consumption increased by only 1.7 percent per year, while GDP was increasing at a rate of 7.4 percent per year. This is also evident in figure 4.2, which shows the shares of the components of GDP. Consumption has dropped to only 40.4 percent of GDP. The comparable consumption ratio for the United States is 70.3 percent, and the average for all developing countries in 2003 is 68.3 percent. Investment in China is an extraordinary 44.3 percent of GDP. The U.S. investment ratio is 15.2 percent, and the average for developing countries is 21.5 percent. The share of investment to GDP in China is more than double the average for developing countries and almost three times the U.S. level. We show comparisons with other countries (grouped over developed and developing countries) in figure 4.3. Interestingly, exports minus imports comprises only 2.6 percent of GDP; consequently China runs, on average, a current account surplus. This is atypical for a developing country, as figure 4.3 demonstrates. China’s huge investment level is mainly financed using domestic savings.

Table 4.1 A Chronology of Economic, Political, and Financial Events in China

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