China and the Emerging Markets

Michael J. Howell
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Michael J. Howell: CrossBorder Capital Ltd.

Chapter Chapter 9 in Capital Wars, 2020, pp 177-196 from Springer

Abstract: Abstract Emerging Markets’ financial markets are often fuelled by cross-border capital inflows. There is a tight linkage between Emerging Markets’ foreign exchange reserves and their domestic credit cycles. Capital inflows are driven both by ‘pull’ as well as by ‘push’ factors. China is a major driver of these capital flows, evidenced by the close correlation between the Chinese liquidity cycle and broader cross-border capital flows into the Emerging Markets. Chinese liquidity is dominated by the State-owned banks (SoBs), although around one-third of liquidity is sourced from highly cyclical shadow banks. China remains financially immature, as shown by the comparative underdevelopment of her gross international balance sheet. China re-exports US dollars when she should export Yuan. The development of a Yuan-based trade credit market and greater international access to Chinese domestic bonds are needed.

Keywords: Global Liquidity; China; Emerging Markets; Yuan; Capital flows (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-39288-8_9

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DOI: 10.1007/978-3-030-39288-8_9

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