China: China Financial Markets

Economics:Financial Markets in China

 

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Hong Kong Centro Finanziario OffShore      costituire società offshore in Hong Kong


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China-Financial-Markets



Financial Markets in China



After suffering a severe bout of inflation in 1989/9, (anger at this inflation was a prime cause of the Tiananmen Square crisis) China realized that inflation can be controlled even as prices were being freed if the money supply could be kept under control.

The key to control the money supply was a bond market; bonds issued with attractive interest rates could soak up the excess money that threatened to fuel inflation. Beijing has now one of the world’s more modern computerized bonds trading system.

China also develop the stock market: Stock markets mobilize the country savings for productive use and allocate those founds competitively.

China experience has shown that a socialist economic system can indeed be transformed into a market system without a social catastrophe. A conclusion that would be very much in doubt if the world had experienced only the Soviet and East European approaches.


China. The degree of economic reform


By 1992 the prices of over 70% of consumer goods and production in materials were determined by the market. By 1992 the vast majority of prices had been liberalized.

A measure of the degree to which socialism has been pushed aside is the share of the economy that goes to central government coffers. In the socialist economy the government sequesters a large fraction of the GNP for its own purposes. 1978 China 38,7%;

1990 China 16,6%; USA 19,7%; Hong Kong 14,3%.

The degree to which the economy has been liberalized is also indicated by the share of the economy in the hands of the state enterprises.  China’s state enterprises control one third of the economy, a proportion similar to that in France or Italy.

Yet another indicator of the degree of changes in China is the extend to which it has opened the economy to foreign trade. China has far surpassed Japan in the share of its economy devoted to export and imports. China’s previous autarkic economy has become remarkably open.


1990:

USSR 5%;

BRAZIL 11, 3;

US 16;

JAPAN 16, 8;

CHINA 25,4.


Trade is a larger share of China economy than Japan or USA. The trade figures are known to be reasonably accurate (one can compare China’s figures on exports to a given country with that country figures of imports from China, and the figures are generally a reasonable match). The measurement of GNP in third world countries is not strictly comparable with the measurements of developed countries. China’s GNP is understated by official statistics. In 1991 official estimate $370 per capita income. IMF study concluded that it was $1450. And an Australian study has shown that Chinese life expectancy of 70 is inconsistent with the average of 56 for other countries as poor as China estimate itself to be. That is in fact comparable with South Korea average longevity of 71 and per capita income of $6000. Food consumption pattern in China are comparable to those of Taiwan when its per capita income was about $1200. The purchasing patterns are typical of people with about 4 times the income that China statistics shows.



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