International Financial Adjustment for China: A Financial Valuation Approach

Date

2013

Authors

Deer, Luke
Song, Ligang

Journal Title

Journal ISSN

Volume Title

Publisher

Chinese Academy of Social Sciences

Abstract

International financial adjustment is the process whereby valuation shifts from asset price and currency changes result in relatively durable net wealth transfers across countries' international balance sheets. This paper applies a financial valuation approach to estimate the direction and the broad extent of recent international financial adjustments on China's international balance sheet. We estimate China's international balance sheet losses resulting from the valuation shifts over the period 2005-2010 and reveal that international currency shifts over the past decade have also generated a range of non-balance sheet financial and monetary adjustment pressures for China. This paper also evaluates how China's evolving international financial policy arrangements could better mitigate China's exposure to international financial adjustments. These arrangements include a more effective currency mechanism and the mechanisms to internationalize the RMB to buffer international financial valuation shocks.

Description

Keywords

Keywords: Exchange rate regime; Financial valuation approach; International financial adjustment; RMB internationalization

Citation

Source

China and World Economy

Type

Journal article

Book Title

Entity type

Access Statement

License Rights

DOI

10.1111/j.1749-124X.2013.12006.x

Restricted until

2037-12-31