Site Loader

number of revaluations to the currency in order to bring itcloser to it market value. While the Chinese yuan is freely convertible under the current account, itremains strictly regulated in the capital account. Chinese authoritiesexpressed their willingness to allow the yuan to be fully convertible in thenear future. Chinese authorities are gradually enhancing the use of the currency in otherparts of the world in order to promote the yuan as a global reserve currency.Although the process is far from being completed, China has already establishedtrade settlements with selected countries and launched a series of currencyswap agreements with more than 20 central banks. In addition, China is rapidlyexpanding the yuan’s offshore market.

The opening up of the country’s capitalmarket will be a crucial step in the yuan’s journey to becoming a major reservecurrency. Risks: Government Measures to Motivateor Restrict FDIChinese government discourages foreign investors willing toinvest in which China seeks to develop their domestic firms into global multinationalcorporations and sectors that has benefited in the past from State-sanctionedmonopolies or a legacy of State investment. The Government alsodiscourages investments intended to profit from speculation (currency, realestate, or asset). Moreover, the Government has indicated that it plans torestrict foreign investment in resource-intensive and non-environment friendly withhighly-polluting industries. High debtIn 2016, China grew at its slowest pace since 1990, as its manufacturing andconstruction industries slowed and fears abounded about its debt levels.According to the Bank of International Settlements, China’s total debt hasgrown from $6tn at the end of the financial crisis to almost $28tn at the endof 2016. This means its total debt is equivalent to 260 per cent of its GDP,while the debts of Chinese companies are about 170 per cent of GDP.

Best services for writing your paper according to Trustpilot

Premium Partner
From $18.00 per page
4,8 / 5
4,80
Writers Experience
4,80
Delivery
4,90
Support
4,70
Price
Recommended Service
From $13.90 per page
4,6 / 5
4,70
Writers Experience
4,70
Delivery
4,60
Support
4,60
Price
From $20.00 per page
4,5 / 5
4,80
Writers Experience
4,50
Delivery
4,40
Support
4,10
Price
* All Partners were chosen among 50+ writing services by our Customer Satisfaction Team

 The new Monetary system left local governments with fewersources of revenue. As a result, they had to rely on land sales and indirectborrowing (mostly so-called “shadow banking”) to finance their activity. Inaddition, local governments put in place off-budget local government financingvehicles to raise funds and finance investment projects. Although debt is still at manageable levels, an increase in thereliance on shadow banking and the rapid pace of debt accumulation isworrisome.

In an effort to increase revenue sources for local governments, inAugust 2014, the National People’s Congress passed amendments to the budgetlaw, allowing provincial government to issue bonds directly and increasetransparency. This move paves the way for local governments to raise debt inthe bond market. China’s government debt is almost entirely denominated in local currency andowned by domestic institutions. In addition, the government has cash savingsequivalent to 6% of GDP in the People’s Bank of China. This situation shieldsthe economy against government debt crises. In 2015, public debt amounted to15.6% of GDP. Conclusion China exited the financial crisis in good shape, with GDPgrowing above 9%, low inflation and a sound fiscal position.

China economy willremain the major driver of global growth for the foreseeable future. All thesein directors show us that China is a good market for our company to do the newinvestment.  China’s growth has long beendriven by capital accumulation, supported by high savings. Financial risks aremounting on the back of high and rising enterprise debt, expanding non-bankactivities and enormous over-capacity in some sectors.

A burst of the housingbubble would hurt the real estate, construction and several manufacturingindustries. However, household indebtedness remains moderate and prudentialregulations for mortgage loans are stringent, so the financial sector couldlikely absorb the shock. Social safety net coverage has improved over the pastdecade, contributing to reduce poverty. Nevertheless, income inequality remainshigh. Social infrastructure needs to be further developed, especially for ruralcitizens, and the tax and transfer system made more progressive.    

Post Author: admin

x

Hi!
I'm Eric!

Would you like to get a custom essay? How about receiving a customized one?

Check it out