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Foreign exchange accumulation and the entrapment of Chinese monetary power: towards a balanced growth regime?

Mattias Vermeiren UGent (2013) NEW POLITICAL ECONOMY. 18(5). p.680-714
abstract
This article criticises the notion that China’s foreign exchange reserves have strengthened its monetary power. While some scholars have argued that China’s international monetary influ-ence has been ‘entrapped’ by the domestic interests of its export sector, a one-sided focus on the export sector fails to identify the significant constraints on its macroeconomic autonomy. Therefore, I propose an extension of the concept of entrapment that draws attention to the key role of state-owned enterprises (SOEs) and their domestic fixed-asset investment in its growth regime: China’s external monetary dependency – which is understood as both export dependency and the need to maintain foreign exchange accumulation – has been caused by a disparity between fixed-asset investment and private consumption that reflects a redistribution of income from the household sector to the SOE sector. In particular, I expose the SOE sector’s rising interests in foreign exchange accumulation by uncovering a mutually reinforcing dynamic between China’s external monetary dependence and the financial repression of its banking system. By entrenching an investment-led growth regime that provides key benefits the SOE sector, this dynamic is found to have seriously constrained the macroeconomic policy autonomy of Chinese authorities to rebalance growth away from investments and exports towards private consumption.
Please use this url to cite or link to this publication:
author
organization
year
type
journalArticle (original)
publication status
published
subject
keyword
DEPENDENCE, HEGEMONY, IMBALANCES, MARKET, POLICY, SYSTEM, foreign exchange reserves, China, monetary power, STATE-OWNED ENTERPRISES, GLOBAL-CRISIS, RISE, ECONOMIC-GROWTH
journal title
NEW POLITICAL ECONOMY
editor
Colin Hay
volume
18
issue
5
pages
680 - 714
publisher
Taylor & Francis
Web of Science type
Article
Web of Science id
000324793700003
JCR category
INTERNATIONAL RELATIONS
JCR impact factor
1.656 (2013)
JCR rank
8/83 (2013)
JCR quartile
1 (2013)
ISSN
1356-3467
DOI
10.1080/13563467.2013.736958
language
English
UGent publication?
yes
classification
A1
copyright statement
I have transferred the copyright for this publication to the publisher
id
2985804
handle
http://hdl.handle.net/1854/LU-2985804
date created
2012-09-12 15:01:29
date last changed
2015-06-17 10:14:20
@article{2985804,
  abstract     = {This article criticises the notion that China{\textquoteright}s foreign exchange reserves have strengthened its monetary power. While some scholars have argued that China{\textquoteright}s international monetary influ-ence has been {\textquoteleft}entrapped{\textquoteright} by the domestic interests of its export sector, a one-sided focus on the export sector fails to identify the significant constraints on its macroeconomic autonomy. Therefore, I propose an extension of the concept of entrapment that draws attention to the key role of state-owned enterprises (SOEs) and their domestic fixed-asset investment in its growth regime: China{\textquoteright}s external monetary dependency -- which is understood as both export dependency and the need to maintain foreign exchange accumulation -- has been caused by a disparity between fixed-asset investment and private consumption that reflects a redistribution of income from the household sector to the SOE sector. In particular, I expose the SOE sector{\textquoteright}s rising interests in foreign exchange accumulation by uncovering a mutually reinforcing dynamic between China{\textquoteright}s external monetary dependence and the financial repression of its banking system. By entrenching an investment-led growth regime that provides key benefits the SOE sector, this dynamic is found to have seriously constrained the macroeconomic policy autonomy of Chinese authorities to rebalance growth away from investments and exports towards private consumption.},
  author       = {Vermeiren, Mattias},
  editor       = {Hay, Colin},
  issn         = {1356-3467},
  journal      = {NEW POLITICAL ECONOMY},
  keyword      = {DEPENDENCE,HEGEMONY,IMBALANCES,MARKET,POLICY,SYSTEM,foreign exchange reserves,China,monetary power,STATE-OWNED ENTERPRISES,GLOBAL-CRISIS,RISE,ECONOMIC-GROWTH},
  language     = {eng},
  number       = {5},
  pages        = {680--714},
  publisher    = {Taylor \& Francis},
  title        = {Foreign exchange accumulation and the entrapment of Chinese monetary power: towards a balanced growth regime?},
  url          = {http://dx.doi.org/10.1080/13563467.2013.736958},
  volume       = {18},
  year         = {2013},
}

Chicago
Vermeiren, Mattias. 2013. “Foreign Exchange Accumulation and the Entrapment of Chinese Monetary Power: Towards a Balanced Growth Regime?” Ed. Colin Hay. New Political Economy 18 (5): 680–714.
APA
Vermeiren, M. (2013). Foreign exchange accumulation and the entrapment of Chinese monetary power: towards a balanced growth regime? (C. Hay, Ed.)NEW POLITICAL ECONOMY, 18(5), 680–714.
Vancouver
1.
Vermeiren M. Foreign exchange accumulation and the entrapment of Chinese monetary power: towards a balanced growth regime? Hay C, editor. NEW POLITICAL ECONOMY. Taylor & Francis; 2013;18(5):680–714.
MLA
Vermeiren, Mattias. “Foreign Exchange Accumulation and the Entrapment of Chinese Monetary Power: Towards a Balanced Growth Regime?” Ed. Colin Hay. NEW POLITICAL ECONOMY 18.5 (2013): 680–714. Print.