Causes of and Remedies for the People’s Republic of China’s External Imbalances: The Role of Factor Market Distortion
Yiping Huang and
Kunyu Tao
Additional contact information
Yiping Huang: Asian Development Bank Institute
Kunyu Tao: Asian Development Bank Institute
No 279, ADBI Working Papers from Asian Development Bank Institute
Abstract:
The current account surplus of the People’s Republic of China (PRC) has drawn much foreign and domestic attention. This paper focuses on the reasons and remedies for the PRC’s current account surpluses. Rather than deploying the standard explanations, we argue that asymmetric market liberalization and the related factor market distortion is the root reason for the PRC’s external imbalances. These cost distortions have artificially lowered PRC production costs, raised profits, and improved their products’ international competitiveness which has not only stimulated the economy, but also brought about severe structural risks. We completed a crude estimation for factor cost distortions in the PRC during 2000–2009 which matched its current account surpluses quite well. In order to rebalance the economy, we recommend that the PRC should adopt a comprehensive reform package focusing on removing the factor market distortions.
Keywords: prc; current account surplus; economic rebalancing; exchange rate; factor market distortion (search for similar items in EconPapers)
JEL-codes: E61 F32 H24 O11 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2011-04-15
New Economics Papers: this item is included in nep-mac and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)
Downloads: (external link)
http://www.adbi.org/files/2011.04.14.wp279.causes. ... ernal.imbalances.pdf Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://www.adbi.org/files/2011.04.14.wp279.causes.remedies.prc.external.imbalances.pdf [302 Moved Temporarily]--> https://www.adbi.org/files/2011.04.14.wp279.causes.remedies.prc.external.imbalances.pdf [302 Moved Temporarily]--> https://www.adb.org/adbi/files/2011.04.14.wp279.causes.remedies.prc.external.imbalances.pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:ris:adbiwp:0279
Access Statistics for this paper
More papers in ADBI Working Papers from Asian Development Bank Institute Kasumigaseki Building 8F, 3-2-5, Kasumigaseki, Chiyoda-ku, Tokyo 100-6008, Japan. Contact information at EDIRC.
Bibliographic data for series maintained by ADB Institute ().