Lessons for China from Financial Liberalization in Scandinavia

Hong Kong Institute for Monetary and Financial Research (HKIMR) Research Paper WP No. 26/2009

Asian Economic Papers, Volume 13, Issue 1, January 2014, Pages 1-44

53 Pages Posted: 3 Sep 2009 Last revised: 6 Sep 2022

Date Written: July 31, 2009

Abstract

This working paper was written by Hongyi Chen (Hong Kong Institute for Monetary Research), Lars Jonung (DG ECFIN, European Commission, Brussels) and MOlaf Unteroberdoerster (International Monetary Fund, Washington DC).

This report identifies a set of policy lessons for China today drawn from the experience of financial deregulation, financial crisis and recovery in Scandinavia during the period 1985-2000. Although there are considerable differences between the huge Chinese economy and the small Nordic countries, there are enough similarities to make lesson-drawing a worthwhile exercise. Based on the Scandinavian experience and the added complexity of China’s status as a transition economy, financial reforms should strike a proper balance between being gradual (to avoid costly mistakes) and substantive (to secure efficiency gains in the longer term) with due consideration being given to initial conditions concerning regulation, taxes and exchange rate arrangements. A well managed process of financial deregulation requires that policy-makers and market participants fully understand the interlinkages between financial reforms and the rest of the economy. In addition, the supervisory and management systems in the financial sector should move in step with the liberalization process.

Keywords: Financial Liberalization, Financial Crisis, Transition, Financial Regulation, Banking, Boom-Bust, China, Scandinavia, the Nordics

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JEL Classification: E52, E58, F31, F32, G01, G21, G28, G32, P52

Suggested Citation

Institute for Monetary and Financial Research, Hong Kong, Lessons for China from Financial Liberalization in Scandinavia (July 31, 2009). Hong Kong Institute for Monetary and Financial Research (HKIMR) Research Paper WP No. 26/2009, Asian Economic Papers, Volume 13, Issue 1, January 2014, Pages 1-44, Available at SSRN: https://ssrn.com/abstract=1466653 or http://dx.doi.org/10.2139/ssrn.1466653

Hong Kong Institute for Monetary and Financial Research (Contact Author)

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