SF Fed Blog
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India’s Farm Loan Waiver Crisis
India’s annual economic growth exceeds 7% and the country just passed sweeping tax reforms. Despite this progress, it faces a growing crisis over farm lending. Farmers are demanding loan waivers that may cost up to 2.6% of GDP. They’ve captured headlines with their protests, destroying milk and agricultural produce, and taking even more extreme measures. Although India’s agricultural sector is in distress, loan waivers are a costly, temporary solution to complex problems and will likely further strain the country’s public sector banks, already stressed by asset quality problems.
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Taiwanese Banks Venture South
Banks from Taiwan are expanding across the Asia-Pacific in a search for yield. The initiative has the potential to boost the financial position of Taiwanese banks, but overseas expansion also brings new risks and challenges.
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Scale Finance: Filling the 95-Percent-Empty Glass
Guest author Steven Goldberg discusses expanding certified evidence-based programs through “Scale Finance,” an enhanced Social Impact Bond model.
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China’s Recent Efforts to Deal with Stressed Loans
The pace of stress loan creation in China has slowed recently, partly reflecting efforts to dispose nonperforming loans and to restructure corporate debts. These programs aim at strengthening the banking sector, but will likely weigh on bank earnings and capital levels in the short run.
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China’s A-Shares Join the MSCI Index
On June 20th, MSCI announced the inclusion of Chinese A-shares to its widely followed emerging markets index. MSCI’s decision to add China, albeit gradually and as a small proportion of the total index, represents a major breakthrough for China’s onshore stock markets.
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Large Japanese Capital Flows Pose Risks to the Asia-Pacific
Japanese investors have long been known for their overseas investments. Following the 2013 onset of the Bank of Japan’s extraordinary monetary policy, the country’s pace of overseas investments has accelerated even further. While Japanese investors have been buying assets around the world, several Asia-Pacific countries have experienced particularly large capital inflows, exposing them to future changes in Japan’s economy and monetary policy. Among them, Thailand and Australia stand out as having high exposure to Japan.
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Demonetization Is Catalyzing Digital Payments Growth in India
Nearly six months after India’s momentous demonetization, the government continues to expand options for digital payments to reduce the economy’s dependence on cash. While old habits die hard, recent data show that new digital payment methods are building momentum. These innovations offer simple, universal tools that may help India leapfrog older technology to reach a less cash-intensive future.
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China’s Growing Presence in Global Bond Indices
Despite the size and importance of China’s bond market, the country has had a limited presence in the major global bond indices. This is starting to change as several important bond indices have taken steps to add China following a series of reforms to the country’s domestic bond market.
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Can Asia Overcome Challenges and Remain Resilient?
Despite sizable capital outflows in recent years, emerging Asia’s strong external position and solid economic performance will help the region weather headwinds and remain financially resilient.