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International Monetary Review, April 2023, Vol. 10 No. 2

2023-05-18 来源:




【Special Column on China’s Two Sessions and Economic Outlook】

1. Understanding economic messages contained in China’s 2023 “Two Sessions” (by Dong Jinyue and Xia Le)

2. Putting the economy back on track and remaining risks: work of the Two Sessions (by Herbert Poenisch)

3. Excessive consumer credit not good to boost consumption (by Li Jianjun)

4. How will the Chinese yuan fare in 2023 as Fed keeps on tightening? (by Guan Tao)

【Global Economy】

1. Global economy to slow further amid signs of resilience and China re-opening (by Pierre-Olivier Gourinchas)

2. Looser financial conditions pose conundrum for central banks (by Tobias Adrian, Christopher Erceg, Fabio Natalucci)

3. Everything everywhere all at once - responding to multiple global shocks (by Fabio Panetta)

4. Accelerating productivity growth can save the global balance sheet (by Jan Mischke)

5. China‘s impact on the fate of global balance sheet (by Andrew Sheng and Xiao Geng)

6. Cross-border payments have reached an ‘inflection point’ (by Lewis McLellan)

7. House prices continue to fall as borrowing costs rise (by Hites Ahir, Prakash Loungani, Karan Bhasin)

【Recent Financial Institutions Crisis】

1. Silicon Valley Bank collapse reverberates through financial system (by Mark Sobel)

【Reform of the International Monetary System】

1. Central banks are reassessing foreign exchange reserves (by Gary Smith)

2. Markets exploring alternative currencies despite dollar dominance (by Julian Jacobs)

【Financial Regulation】

1. Big techs in finance-forging a new regulatory path (by Agustin Carstens)

2. Crypto contagion underscores why global regulators must act fast to stem Risk (by Li Bo and Nobuyasu Sugimoto)

3. Effective crypto regulation starts at layer 1 (by Michael Kanovitz)

【Sustainable Growth】

1. Scaling up climate finance for emerging markets and developing economies (by Li Bo)

2. Carbon finance is at the core of climate goals (by Marcus Pratsch and Frank Scheidig)

【Working Paper】

1. Dancing with dragon, the RMB and developing economies’ currencies (by He Qing, Liu Junyi and Yu Jishuang)

2. Digital financial capability and entrepreneurial performance (by Luo Yu, Peng Yuchao and Zeng Lianyun)



Special Column on China’s Two Sessions and Economic Outlook


Understanding Economic Messages Contained in China’s 2023 “Two Sessions”


Dong Jinyue, Senior Economist, BBVA Research

Xia Le, Asia Chief Economist, BBVA Research


The main takeaways of this year’s “two sessions” include below important perspectives: 2023 growth target and a series of other key economic targets; 2023 monetary and fiscal policy outlook; and the State Council institutional reforms. 


In general, the “around 5%” growth target and other economic targets are in line with the market expectations, considering the challenges to rebuild market sentiments and repair households and enterprises’ balance sheets after lifting three-year “zero Covid” policy. Amid the US Fed interest rate hike cycle, monetary policy is described as prudent and “targeted”, excluding possibilities of LPR cut in the rest of the year; while the expansionary fiscal policy remains the main growth stimulus. Finally, a series of reshuffling and restructuring of State Council departments in technology, financial regulation and data bureau indicate the authorities’ determinations to deal with China-US technology war, technology self-sufficiency, financial stability concerns as well as national security.



Putting the Economy Back on Track and Remaining Risks: Work of the Two Sessions


Herbert Poenisch, Former Senior Economist of BIS


While it is commendable to create a new financial regulatory authority to control the economic and financial risks in the economy, this deals with the manifestation rather than the roots of risk. In a market-based economy risks always exists. They cannot be regulated away. They can only be dealt with in a two-pronged approach.


According to Western understanding, regulations concern the individual economic agents which should act within a set of clear and transparent guidelines how to assess and manage their microeconomic risks. Regulatory ambiguity and arbitrage should be avoided as well as inadequate compliance. Even if all agents were managing their risks according to these guidelines, would that guarantee systemic stability? There has been substantial discussion on the subject with the conclusion that systemic financial stability cannot be guaranteed even by well managed regulation and compliance.


There are risks beyond individual players, such as natural disasters, externalities and lack of confidence in economic and financial developments. Emerging geopolitical risks which are well beyond any individual institution, or even beyond the power of a national economy, albeit an important one, have escalated in the recent past and loom big on the horizon.


Global Economy


Global Economy to Slow Further Amid Signs of Resilience and China Re-opening


Pierre-Olivier Gourinchas, Director of Research, IMF


Where inflation pressures remain too elevated, central banks need to raise real policy rates above the neutral rate and keep them there until underlying inflation is on a decisive declining path. Easing too early risks undoing all the gains achieved so far.


The financial environment remains fragile, especially as central banks embark on an uncharted path toward shrinking their balance sheets. It will be important to monitor the build-up of risks and address vulnerabilities, especially in the housing sector or in the less-regulated non-bank financial sector. Emerging market economies should let their currencies adjust as much as possible in response to the tighter global monetary conditions. Where appropriate, foreign exchange interventions or capital flow measures can help smooth volatility that’s excessive or not related to economic fundamentals.




China’s Impact on the Fate of Global Balance Sheet


Andrew Sheng, Distinguished Fellow at the Asia Global Institute at the University of Hong Kong

Xiao Geng, Professor of Shenzhen Finance Institute, the Chinese University of Hong Kong and President of Hong Kong Institution for International Finance


Just as a corporate balance sheet can provide insights into a company's financial health, a "global balance sheet" (GBS), tallying the assets and liabilities of governments, corporations, households, and financial institutions, can do the same for the world economy. That logic drove the McKinsey Global Institute (MGI) to begin compiling, and regularly updating, a GBS covering 10 countries that together represent more than 60 percent of the world GDP.


MGI's first GBS, released in late 2021, showed that during the first 20 years of this century, global assets grew faster than output. In 2020, assets on the world's balance sheet totaled more than $1.5 quadrillion (about 18.1 times their GDP) — about triple the total in 2000 (when assets amounted to about 13.2 times the GDP). The growth of global wealth also outpaced (rather tepid) GDP growth, implying that wealth became increasingly concentrated among those with real estate and financial assets.


Recent Financial Institutions Crisis


Silicon Valley Bank Collapse Reverberates Through Financial System


Mark Sobel, US Chair of OMFIF


The collapse of Silicon Valley Bank and Signature Bank and the US federal government’s rescue of all depositors through the invocation of a systemic exemption will unleash a lasting torrent of recrimination, introspection and commentary, going well beyond the rescue itself. A plethora of issues will need to be assessed and those set out here will undoubtedly already be on the table.


Outrage that the rescue is a bank bailout and will foment moral hazard are already being loudly heard. Up against bailout criticisms, the Federal Reserve and Treasury will feel compelled to defend their actions, reverting to the standard argument that shareholders will get wiped out and others hurt, so the rescue should not be seen as a bailout. But, of course, uninsured depositors are being protected.


Authorities are quite mindful of moral hazard and the adverse incentives spawned by their actions. But just as has been the case, whether Republicans or Democrats were in power such as in 2008-09, the immediate need to protect the global and/or US economic and financial systems from severe harm and runs is rightly seen as far outweighing moral hazard concerns.


Reform of the International Monetary System


Central Banks Are Reassessing Foreign Exchange Reserves


Gary Smith, Managing Director of Sovereign Focus


Central bank foreign exchange reserves are high-profile, state-owned investments. It should not be surprising that in a more fractured geopolitical world, many nations will reassess how these assets are managed. The discussion of global trends (for example, into or out of the dollar) may become less relevant as individual national choices are aligned with nations which are political and economic partners. Weaponisation of finance will give impetus to the continued development of a more multi-polar international monetary system, and for further currency diversification in central bank reserves holdings.


Financial Regulation


Crypto Contagion Underscores Why Global Regulators Must Act Fast to Stem Risk


Li Bo, Deputy Managing Director of IMF

Nobuyasu Sugimoto, Deputy Division Chief of IMF Financial Supervision and Regulation Division


The already volatile world of crypto has been upended anew by the collapse of one its largest platforms, which highlighted risks from crypto assets that lack basic protections.


The losses punctuated an already perilous period for crypto, which has lost trillions of dollars in market value. Bitcoin, the largest, is down by almost two-thirds from its peak in late 2021, and about three-quarters of investors have lost money on it, a new analysis by the Bank for International Settlements showed in November.


During times of stress, we’ve seen market failures of stablecoins, crypto-focused hedge funds, and crypto exchanges, which in turn raised serious concerns about market integrity and user protection. And with growing and deeper links with the core financial system, there could also be concerns about systemic risk and financial stability in the near future.


Many of these concerns can be addressed by strengthening financial regulation and supervision, and by developing global standards that can be implemented consistently by national regulatory authorities.


Working Paper


Dancing with Dragon, the RMB and Developing Economies’ Currencies


He Qing, School of Finance, Renmin University of China

Liu Junyi, Soka University of America

Yu Jishuang, School of Finance, Renmin University of China


Abstract: In this paper we analyse Chinese RMB co-movements with the currencies of other developing economies using daily data from January 1, 2006 to December 31, 2020. We find that the RMB plays an important role in East Asia & Pacific. Bilateral trade significantly increases the probability of RMB co-movements with other currencies while inflation differential decreases it. Additionally, the currencies of the economies that are more inclined to adopt a pegging system are less likely to co-move with the RMB. We further divide the sample into three sub-periods based on two major China’s currency reforms and the results are consistent with our main finding. We also investigate the nonlinear determinants of RMB co-movements in high and low volatility regimes, respectively, and show the different patterns. Last but not least, we find that RMB currency swap and the Belt and Road Initiative amplify RMB co-movements in larger and more developed economies.



Digital Financial Capability and Entrepreneurial Performance


Luo Yu, School of Finance, Renmin University of China

Peng Yuchao, School of Finance, Central University of Finance and Economics

Zeng Lianyun, School of Finance, Renmin University of China


Abstract: In the context of fast digitization of commercial and financial ecosystem in China, this study explores the impact of digital financial capability on household entrepreneurial performance. Utilizing China Household Finance Survey 2017 data, this paper is among the first to define and measure digital financial capability, showing that it has significant and positive influence on household business ownership, innovation and financial performance. The results still hold after addressing endogeneity. Furthermore, we illustrate how digital financial capability impacts household entrepreneurial performance by scrutinizing indirect effects of both commercial and financial channels. In addition, heterogeneity regarding vulnerable populations is also examined for deepening understanding of such relationships. This study calls attention to the importance of digital financial capability to better look upon the opportunities and challenges in real-time micro economic lives in China and beyond, providing insights on whether and how digital financial capability affects household entrepreneurial performance, as well as implications for emerging economics who are going through similar developing stages.