China in Global Financial System

731
DOI: 10.20542/0131-2227-2016-60-10-29-40

S. Nozdrev, Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (IMEMO), 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation (nozdrev-sv@imemo.ru

Abstract. The article deals with the current position of China in the global financial system. The main factors determining the place of China in international capital flows, its position as the place for and the source of foreign direct investment, the performance of Chinese banks in the cross-border transactions, the development of the securities market and international investment funds are analyzed. China’s transnational development strategy is aimed at creating a balance between domestic and transnational business. Using available resources of national and foreign currencies local banks are keen to promote their business with foreign banks inside China itself and further develop cooperation beyond its borders. The internationalization of China's securities market is associated with the expansion of the two main stock exchanges – in Shanghai and Shenzhen, as well as with the increase of foreign investors’ participation in the Chinese bonds issued in Yuan (RMB). One of promising directions for capital market’s development is the program Stock Connect aimed at greater integration of the national capital market into the global economy. These processes are to produce a basis for the eventual introduction of full international convertibility of the Chinese currency and, respectively, more flexible access to domestic and foreign capital resources, for the development of offshore centers and for the growth of Chinese financial assets abroad. At the same time, in many respects the country still lags behind the leading developed countries. Despite the world's largest accumulation ratio, China does not yet established itself as a major payer at the international capital market. Despite the increase in both incoming foreign direct investment into China's economy and its own outward FDI, the total volume of investment is still below the level of the United States. Currently, the incoming foreign direct investment in China (including Hong Kong) account for 49% of that of the United States and the outward FDI – 31%. According to the author conclusion, the significant discrepancies in the structures of foreign assets and liabilities seriously reduce the profitability of the international operations of China. The estimated yield on the Chinese outward investments is about 3% against 5.6% on the incoming ones

Keywords: China, global financial system, balance of payments, cross-border capital movement, direct investment, securities market, internationalization, liberalization 


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For citation:
Nozdrev S. China in Global Financial System. World Eonomy and International Relations, 2016, vol. 60, no. 10, pp. 29-40. https://doi.org/10.20542/0131-2227-2016-60-10-29-40



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