Center for Pacific Basin Studies
The Center for Pacific Basin Studies seeks to promote cooperation among Pacific Basin central banks and enhance public understanding of major monetary and economic policy issues in the region.
CPBS Annual Reports
FRBSF Working Paper 2013-12
This paper presents empirical evidence on how asset market linkages between China and Asia shifted during and after the global financial crisis of 2008-2009. We find only weak cross-country linkages in longer-term interest rates, but much stronger linkages in equity markets. We also find that the strength of the correlation of equity price changes between China and other Asian countries increased markedly and has remained high in recent years.
Pacific Basin Notes
Occasional series of the FRBSF Economic Letter2014-03
China’s household saving rate has risen substantially during the past two decades. Research suggests that increased job uncertainty following reforms and massive layoffs in state-owned enterprises during the late 1990s contributed significantly to the increase. Facing higher unemployment risks after the reforms, workers in state-owned enterprises have tended to save more as a precaution. A recent study estimates that precautionary saving driven by the reforms explains about a third of Chinese urban household wealth accumulation from 1995 to 2002.2013-08
Some commentators have questioned whether China’s economy slowed more in 2012 than official gross domestic product figures indicate. However, the 2012 reported output and industrial production figures are consistent both with alternative Chinese indicators of the country’s economic activity, such as electricity production, and trade volume measures reported by non-Chinese sources. These alternative domestic and foreign sources provide no evidence that China’s economic growth was slower than official data indicate.2012-36
China prohibits its private sector from freely trading foreign assets and tightly manages currency exchange rates. In the wake of the recent global financial crisis, interest rates on China’s foreign assets fell sharply, while yields on Chinese domestic assets remained relatively high, posing a challenge for China’s monetary policy. Opening the capital account would improve China’s capacity to weather external shocks, such as sudden declines in foreign interest rates. However, allowing the exchange rate to float without removing capital controls is less effective.