Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Large Net Foreign Assets an indication of Economic Weakness rather than Strength

10.12.2007
According to a new study published in the Wiley-Blackwell journal – China & World Economy – China’s incredible rise as a net creditor at such an early stage of development is very rare; and might actually reflect weakness rather than strength.

China’s international investment position has been characterized by its huge and increasing net foreign assets – and despite its low per capita incomes and relative scarcity of capital – is positioned as a net creditor. Her net foreign assets in 2006 accounted for 25% of the country’s GDP growth – in stark contrast to many countries who hold a higher GDP per capita and still have relatively large net foreign liabilities.

Author of “China as a Net Creditor: An Indication of Strength or Weaknesses?” Mr. Xin Wang said, “There is no reason for China to be complacent in spite of her large current account surplus and quick build-up of foreign exchange reserves. As a very poor country in terms of GDP per capita, China continues to provide large amount of capital to the outside world- including the richest countries. It is quite unusual and may be reflective of deeply-rooted institutional and structural problems.”

Some of the issue China face include underdeveloped capital markets, biased resource allocation and a defective social security system – all of which have contributed to her rapid increase in national savings which have not been fully and efficiently utilized. The high cost of China’s foreign liabilities and her corresponding low returns on her foreign assets also mean that China’s has yet to generate positive return, while facing potentially large exchange risks.

China must readjust her development model and make improvements to her social security system in order to put the country’s economic development on a more solid base. Some of the recommendations include the gradual opening up of domestic financial markets, loosening of restrictions on domestic private firms, adjusting preferential policies enjoyed by foreign-funded firms as well as gradually enlarging the channels overseas investments to build up China’s domestic asset management capabilities.

Mr. Wang adds, “China must speed up her economic reforms and allow the market to play a fundamental role in resource allocation. Only then will the resulting decrease of net foreign assets no longer become a cause for concern, but rather, a sign of good times.”

Alina Boey | alfa
Further information:
http://www.blackwellpublishing.com/press/pressitem.asp?ref=1544

More articles from Studies and Analyses:

nachricht First form of therapy for childhood dementia CLN2 developed
25.04.2018 | Universitätsklinikum Hamburg-Eppendorf

nachricht Do microplastics harbour additional risks by colonization with harmful bacteria?
05.04.2018 | Leibniz-Institut für Ostseeforschung Warnemünde

All articles from Studies and Analyses >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Why we need erasable MRI scans

New technology could allow an MRI contrast agent to 'blink off,' helping doctors diagnose disease

Magnetic resonance imaging, or MRI, is a widely used medical tool for taking pictures of the insides of our body. One way to make MRI scans easier to read is...

Im Focus: BAM@Hannover Messe: innovative 3D printing method for space flight

At the Hannover Messe 2018, the Bundesanstalt für Materialforschung und-prüfung (BAM) will show how, in the future, astronauts could produce their own tools or spare parts in zero gravity using 3D printing. This will reduce, weight and transport costs for space missions. Visitors can experience the innovative additive manufacturing process live at the fair.

Powder-based additive manufacturing in zero gravity is the name of the project in which a component is produced by applying metallic powder layers and then...

Im Focus: Molecules Brilliantly Illuminated

Physicists at the Laboratory for Attosecond Physics, which is jointly run by Ludwig-Maximilians-Universität and the Max Planck Institute of Quantum Optics, have developed a high-power laser system that generates ultrashort pulses of light covering a large share of the mid-infrared spectrum. The researchers envisage a wide range of applications for the technology – in the early diagnosis of cancer, for instance.

Molecules are the building blocks of life. Like all other organisms, we are made of them. They control our biorhythm, and they can also reflect our state of...

Im Focus: Spider silk key to new bone-fixing composite

University of Connecticut researchers have created a biodegradable composite made of silk fibers that can be used to repair broken load-bearing bones without the complications sometimes presented by other materials.

Repairing major load-bearing bones such as those in the leg can be a long and uncomfortable process.

Im Focus: Writing and deleting magnets with lasers

Study published in the journal ACS Applied Materials & Interfaces is the outcome of an international effort that included teams from Dresden and Berlin in Germany, and the US.

Scientists at the Helmholtz-Zentrum Dresden-Rossendorf (HZDR) together with colleagues from the Helmholtz-Zentrum Berlin (HZB) and the University of Virginia...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

VideoLinks
Industry & Economy
Event News

Invitation to the upcoming "Current Topics in Bioinformatics: Big Data in Genomics and Medicine"

13.04.2018 | Event News

Unique scope of UV LED technologies and applications presented in Berlin: ICULTA-2018

12.04.2018 | Event News

IWOLIA: A conference bringing together German Industrie 4.0 and French Industrie du Futur

09.04.2018 | Event News

 
Latest News

World's smallest optical implantable biodevice

26.04.2018 | Power and Electrical Engineering

Molecular evolution: How the building blocks of life may form in space

26.04.2018 | Life Sciences

First Li-Fi-product with technology from Fraunhofer HHI launched in Japan

26.04.2018 | Power and Electrical Engineering

VideoLinks
Science & Research
Overview of more VideoLinks >>>