Factor Market Distortion and the Current Account Surplus in China

Yiping Huang and Kunyu Tao
Additional contact information
Kunyu Tao: China Center for Economic Research, Peking University, Yiheyuan Road No. 5, Beijing, China 100871.

Asian Economic Papers, 2010, vol. 9, issue 3, pages 1-36

Abstract: China's large current account surpluses not only destabilize its own macroeconomic conditions, but are also a focal point for global rebalancing discussions. Existing explanations by the literature fail either to account for the recent surge or to offer actionablepolicy responses. In this study, we propose an alternative hypothesis: asymmetric market liberalization and associated cost distortions. These distortions are producer subsidy equivalents, which contributed to both extraordinary growth performance and the growing structural imbalances. Our rough estimates of such factor cost distortions offer some explanations for recent movements of the current account. We argue that China needs to adopt a comprehensive reform package to rebalance its economy. (c) 2010 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Date: 2010
References: Add references at CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://www.mitpressjournals.org/doi/pdfplus/10.1162/ASEP_a_00020 link to full text (text/html)
Access to full text is restricted to subscribers.

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: http://EconPapers.repec.org/RePEc:tpr:asiaec:v:9:y:2010:i:3:p:1-36

Ordering information: This journal article can be ordered from
http://www.mitpressjournals.org/loi/asep

Access Statistics for this article

Asian Economic Papers is edited by Jeffrey D. Sachs, Yunjong Wang and Wing Thye Woo

More articles in Asian Economic Papers from MIT Press
Series data maintained by Karie Kirkpatrick ().