1、The Nature of Chinas Economy and Global Financial Crisis,Professor Jun Zhang China Center for Economic Studies, Fudan University,Stylized Facts,Higher Saving Rates; Higher Investment/GDP ratios; Rising Export/GDP ratio; Low productivity growth in non-tradable sector; Employment created in manufactur

2、ing sectors; Bank-based financial system; Interest rates and exchange rates fixed; De facto capital mobility;,Chinas Exchange Rate (Yuan against US Dollar),Export/GDP,Inflow of FDIs,Balance of Trade (1978-2004),Balance of Trade by Partners,Foreign Exchange Reserves,The most dynamic part of Chinese r

3、eal economy is the private and exporting sectors; But they have been consistently facing financial constraints; Since 1999, however, one of the important drivers of Chinas boom has been the emergence and expansion of urban real estate markets;,Free housing system terminated nationally in 1999; Since

4、 then, urban housing sector was stimulated with continuous expansion of bank credits; Urban housing boom created huge revenues for local governments and stimulated housing investments;,Real estate investments accounted for rising share of capital construction in China; Housing boom transmitted into

5、stock market boom and assets prices soar; Housing boom led to improved profitability in upstream and basic industries;,Chinas boom (1998-2007) was due to: Expansion of exports; Assets boom;,Fixed exchange rates invited rapid inflow of capital and induced passive expansion of money supply; M2/GDP has

6、 been rising; Excessive liquidity growth fueled assets prices and later on led to inflation of non-tradable goods;,Profitability,Chinese economy began the downward process of adjustments in 2007 when assets prices recorded historical high and supply-side inflation began to break out; Monetary policy

7、 faced dilemma: contraction works assets sector, but hurts exporting sector due to lack of market-based financing institutions;,Chinese government decided to tighten bank credits in the early of this year, and by May, exporting sector faced inadequacy of finance and closures of business happened; Ch

8、inas exporting sector deteriorated due to external market shrinkage; Inflow of FDIs slows down;,The slow down of Chinas economy is largely a result of its domestic issues and global financial crisis deepens this process; Expansion of banking credit triggered housing markets and stock exchange; Risin

9、g M2/GDP reflects financial deepening into assets sector related to real estate, not exporting sector;,Exporting sector is highly venerable to external shock; China therefore needs overcome structural problem to facilitate financial resources to support the productivity-enhancing sectors and create

10、more jobs to sustain its high growth;,The Recent Deceleration,The Chinese economy shows deceleration of the growth in output and industrial VAs; The rate of inflation has dropped down to 2 % last month, PPI was 4%; Housing price index was up by 0.2%; Electricity generation went down by 4%; Exports tu