Abstract

http://ssrn.com/abstract=991640
 
 

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Financial Openness and the Chinese Growth Experience


Geert Bekaert


Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Campbell R. Harvey


Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)

Christian T. Lundblad


University of North Carolina Kenan-Flagler Business School

June 2007


Abstract:     
We reflect on China's economic performance from the perspective of the experiences of a broad panel of countries. We formulate an econometric framework building on standard growth regressions that allows us to measure the impact of various factors on economic growth and growth variability. As China has become more and more integrated into the world's economic and financial landscape, we devote special attention to measures of (de jure) financial openness. We also document how the real effects of openness are impacted by financial development, political risk, and the quality of institutions. Standard growth regressions cannot explain China's extraordinary growth experience and we fail to find an important role for foreign trade and foreign direct investment. In contrast, the sheer volume of investment has played a significant role in China's growth. As China's per capita GDP continues to grow, it must find sustainable sources of growth. We identify a more efficient financial sector, less state ownership higher quality of government institutions and full financial openness as important factors. Interaction analysis suggests that the beneficial effects of financial openness first require further financial and institutional development. China is less of an outlier in its growth variability experience but achieved high growth with surprisingly low growth volatility.

Number of Pages in PDF File: 71

JEL Classification: E32, F30, F36, F43, G15, G18, G28

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Date posted: June 7, 2007  

Suggested Citation

Bekaert, Geert and Harvey, Campbell R. and Lundblad, Christian T., Financial Openness and the Chinese Growth Experience (June 2007). Available at SSRN: http://ssrn.com/abstract=991640 or http://dx.doi.org/10.2139/ssrn.991640

Contact Information

Geert Bekaert (Contact Author)
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Campbell R. Harvey
Duke University - Fuqua School of Business ( email )
Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)
919-660-8030 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Christian T. Lundblad
University of North Carolina Kenan-Flagler Business School ( email )
Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-8441 (Phone)

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References:  52
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