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China's Experience with Indexed Government Bonds, 1988-1996: How Credible Was the People's Republic's Anti-Inflationary Policy?

Richard Burdekin () and Xiaojin Hu

Review of Development Economics, 1999, vol. 3, issue 1, pages 66-85

Abstract: The People's Republic of China introduced indexed government bonds in the face of the inflation panic of 1988-89 and reintroduced them when inflation surged upward again in 1993. Measures of inflation expectations--as derived from the trading prices of these indexed bonds--suggest that the government gained credibility from its ability to contain inflation in 1989. But the governments failure to quickly half the 1993-95 inflation led, by late 1994, to soaring inflation expectations and, ultimately, a heavy financial penalty for the government as the 1992 and 1993 bond issues matured while inflation was still high. Copyright 1999 by Blackwell Publishing Ltd

Date: 1999
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