What Is the Extent of Monetary Sterilisation in China?

A. Ouyang and T. D. Willett

Chapter 1 in Economic Management in a Volatile Environment, 2015, pp 3-26 from Palgrave Macmillan

Abstract: Abstract China is the world’s largest international holder, having amassed about US$ 2 trillion of international reserves by the end of 2008 (Figure 1.1), rising to US$ 3 trillion by 2010.1 The rapid accumulation of reserves by China has generated several controversies. One concern is whether this continuing balance of payments (BOP) surplus signals the need for a substantial revaluation or appreciation of the Chinese Yuan (CNY) to protect China both from the inflationary consequences of the liquidity buildup and a misallocation of resources2 as well as to help ease global imbalances. An alternative view, particularly associated with McKinnon and Schnabl (2003a,b; 2004), argues that a fixed exchange rate is an optimal policy for China and the larger Asian region both on the grounds of macroeconomic stability and rapid economic development. The global monetarist approach of McKinnon is based on the assumption of little or no sterilisation of reserve accumulation, so that any BOP imbalance is temporary. However, many other commentators have suggested that the Chinese government’s concern with inflation has led the People’s Bank of China (PBC) to heavily sterilise these reserve inflows.3

Keywords: Exchange Rate; Central Bank; Capital Inflow; Foreign Asset; International Reserve (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:pal:palchp:978-1-137-37152-2_1

Ordering information: This item can be ordered from
http://www.palgrave.com/9781137371522

DOI: 10.1057/9781137371522_1

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().