A Great Leap Forward, the Second Time Around: Thirty Years of Economic Reforms in China

December of 2008 marks the 30th year of the beginning of China's economic opening. The country's rapid development since 1978 is without historical precedent. Yet this growth is even more impressive when one surveys the entire period from the founding of the People's Republic in 1949 to present. Although the years from1949 to 1978 were close to catastrophic, and the basis for economic development over the next thirty years could have hardly been worse, on the 60th anniversary of the government's founding, the country's achievements - at least from an economic perspective - must be viewed as an extraordinary success. On the 30th anniversary of China's economic opening, the following article assesses that which has been achieved to date. It also explores the causes of the economic stagnation of the "lost decades" between 1949 and 1978. The deep stagnation experienced during the early years of the People's Republic as well as China's reorientation in 1978 and subsequent boom can only be understood with reference to this historical period. Any assessment of the country's present-day political and economic situation is also contingent upon an appreciation of the long cycles that characterize Chinese history. Since the opening of the country and its rise to the world's second-largest economy and trading partner, China has surpassed Japan and taken on equal standing with the EU as the most significant decision maker in economic and political affairs after the US. China's importance is not yet reflected in World Bank and IMF quotas or in the composition of the G8-yet China is sure to take on an increasingly prominent role in coming years. If China can maintain the growth rates witnessed over the past three decades, in less than 15 years it will surpass the US as the world's largest economy and most significant trading partner. While the future is by no means preordained, all of the preconditions for this to occur are in place. China still possesses large labor reserves; is a net creditor to the rest of the world and holds currency reserves of a historically unprecedented volume; will soon be the largest and most dynamic domestic market in the world (and will therefore continue to attract direct foreign investment); and displays considerable potential for growth in domestic demand. Furthermore, the reform of China's financial sector and the deregulation of capital flows could potentially stoke additional economic expansion. The current financial crisis has not left China unscathed, but is unlikely to have a lasting effect on the country's long-term development.China, Communism, Market Economy, Gradualism

The Russian Banking Sector: Unsolved Problems Seven Years after the Crisis

The Russian foreign exchange and financial market crisis of summer 1998 was caused by international movements of capital following the Asian crisis, and it plunged the Russian commercial banks into major difficulties. Practically the entire banking sector was hit by acute liquidity shortage. The main cause of the banking crisis must be seen in the banking sector regulation, which was defective if not lacking altogether. This encouraged the banks to take big exchange rate risks on liabilities in foreign currencies, and to lend with little risk diversification, which proved fatal in the crisis. The method used by the Russian authorities to deal with the crisis was also unorthodox by western standards. The crisis was overcome without major restructuring in the banking sector and accomplished at astonishingly little cost to the economy as a whole. However, the success in the form of good growth rates in every year since 1998 only seemingly justifies this neglect, for the relatively weak constitution of the banking sector in Russia _ compared with other transition economies _ has certainly hampered even better economic development. Although some more recent legislative initiatives do give reason to hope for improvement here, powerful interests are still preventing the optimal restructuring of the banking scene that is necessary for the economy as a whole.

THE EURO AND CAPITAL MARKETS: A NEW ERA

This paper is organised as follows. Section 2 examines the forces that have changed the financial landscape at the world level over the last two decades. Section 3 summarises the arguments of how the introduction of the euro should add to these broader economic forces in reshaping euro financial markets. Section 4 verifies whether the actual experience since January 1999 has been in line with the ex ante expectations. Most of the analysis will be based on developments of the bond market. Section 5 offers some conclusions.Euro; capital markets; bonds

Economic Development in Turkey Stabilizes: Banking Sector Reforms Make Progress

The year 2004 saw Turkey take a big step forward to the European Union, as international investors also believe, and in December last year the European Council opened up real prospects of entry for Turkey for the first time. Agreement was also reached with the International Monetary Fund (IMF) on further support, chiefly to secure the servicing of public debt in the next few years. The consequences of the serious financial crisis in 2001 now seem to be largely overcome, although the inflation rate is still too high - currently at around 9%. However, it is believed that Turkey may well fulfil the Maastricht criteria for public budgets in the next two years. According to the latest figures economic growth was around 9% last year, and strong growth is expected this year as well. This analysis takes a closer look at some of the important aspects of Turkey's economic development in recent years and the state of the reforms already carried out, particularly in the banking sector. It shows that the Turkish economy is developing very satisfactorily - compared with the development in the most recent new EU member states as well, so at least in the economic perspective Turkey's aim of coming close to EU membership in the medium term does not appear to be unrealistic.

Großer Sprung im zweiten Anlauf: 30 Jahre Wirtschaftsreformen in China

Im Dezember 2008 jährt sich der Beginn der wirtschaftlichen Öffnung Chinas zum dreißigsten Mal. Der Wachstumsspurt der Volksrepublik China seit 1978 übertrifft alles bisher Bekannte. Diese Dynamik ist umso beachtlicher, blickt man auf den gesamten Zeitraum seit der Gründung der Volksrepublik im Oktober 1949 zurück: Obwohl die Jahre 1949 bis 1978 einer Katastrophe gleichkamen, die Ausgangslage für die folgenden 30 Jahre kaum ungünstiger sein konnte, wird die Bilanz zur 60- Jahr-Feier der Volksrepublik zumindest aus ökonomischer Sicht außerordentlich positiv ausfallen. Seit der Öffnung und dem wirtschaftlichen Aufstieg zur zweitgrößten Wirtschafts- und Handelsmacht hat China Japan überholt und aufgeschlossen zur Europäischen Union als wichtigstem wirtschaftspolitischen Entscheidungsträger nach den Vereinigten Staaten. Diese Bedeutung Chinas spiegelt sich noch nicht in den Quoten von Weltbank und Währungsfonds oder der G8-Grupppe wider, aber dies ist nur eine Frage der Zeit. Wenn China das Wachstum der vergangenen Jahrzehnte aufrechterhalten kann, wird es in weniger als 15 Jahren die Vereinigten Staaten als größte Wirtschafts- und Handelsmacht der Welt ablösen. Die Voraussetzungen dafür sind vorhanden. China hat noch große ungenutzte Arbeitsreserven, ist Nettogläubiger der restlichen Welt und verfügt daher über Devisenreserven in einer bislang unerreichten Größenordnung, ist bald der größte Binnenmarkt der Welt und bleibt weiterhin attraktiv für ausländische Direktinvestoren. Reformen des Finanzwesens und Liberalisierung der Zahlungsbilanz können zusätzliche Wachstumsschübe auslösen. Die gegenwärtige Finanzkrise lässt China nicht unberührt, hat aber keinen nachhaltigen Einfluss auf die langfristige Entwicklung.China, Communism, Market Economy, Gradualism

THE TURKISH BANKING SECTOR - CHALLENGES AND OUTLOOK IN TRANSITION TO EU MEMBERSHIP

The paper explores the readiness of the Turkish banking sector for integration into the European Union. We address the issue from four different angles. First, we review the present structure and health of the sector, including the state of the regulatory framework, providing where possible a comparative perspective with the larger EU accession countries. Second, we look at the sector's financial solidity in 2003, with a view to gauging its readiness to adapt to a more challenging banking environment. Third, we look at the present obstacles to financial deepening and identify the most pressing issues that seem to hinder the sector's growth. Fourth, we explore issues of productivity and efficiency in the sector. In a final section, we ask the question of whether the Turkish banking sector is or will be ready in due time for EU accession and formulate some policy recommendations. We conclude that in 2004 the Turkish banking sector compares well with those of the new members of the EU. The major source of financial instability in the past was macroeconomic instability and government involvement. At present Turkey is closer to achieving macro-stability than ever in the past, and the government is reducing its direct involvement. Major strides have been accomplished after the crisis of 2001 in cleaning up a very nontransparent and politicized banking environment and in upgrading the regulatory structure to EU standards. Clearly, the job is not finished yet, with the challenge of introducing risk-management based on Basle II and of bringing the capital market to EU standards. Further consolidation and mergers with foreign partners will be inevitable. Should EU integration become a concrete vision of the future, macro stability has great chances to become rooted in Turkey and the banking sector will quickly move to EU standards, long before any accession date.Banking sector; European Union; integration; Turkey; regulatory framework

Economic Transition in Central and Eastern Europe: Planting the Seeds

Analysing the key problems facing the transition countries in Central and Eastern Europe, this book describes the legacy of the central planners, the progress achieved so far and the need for further reforms. It documents the outstanding successes and failures, and analyses why certain approaches to transition have worked and others have not. It tests where transition is over and shows how some countries have graduated from \u27transition\u27 to \u27integration\u27 through their efforts to join the European Union (EU). It discusses the costs and benefits of the eastern enlargement of the EU. The specific experiences of German unification, the Soviet Union\u27s disintegration, and Russia\u27s complex reforms are examined, as are the specific issues that need to be addressed in the Balkans. The book concludes by indicating how the expanding EU could help the poor performers through inclusion in a continent-wide integrated economic area

Liberalizing Cross-Border Capital Flows: How Effective Are Institutional Arrangements against Crisis in Southeast Asia

This paper examines capital controls in two ways. First, it assesses whether capital controls have an economic justification within the context of an economyâÂÂs and, in particular, its financial sectorâÂÂs stage of development. It concludes that capital controls can be justified in countries with an immature financial sector and macroeconomic imbalances. Second, it presents survey of current capital controls in ASEAN+3. It identifies three avenues for making controls more efficient: (i) a tax on capital inflows, or alternatively, a Tobin tax; (ii) a replacement of extensive administrative controls with stricter prudential standards for financial institutions; and (iii) a special treatment for Asian currency unit (ACU) operations, implying selective capital flow liberalization.Economic integration; capital controls; Southeast Asia; ASEAN+3

Stabilisierung der Wirtschaftsentwicklung in der Türkei: Fortschritte bei der Reform des Bankensektors

Das Jahr 2004 hat die Türkei auch aus der Sicht der internationalen Investoren einen großen Schritt in Richtung Europäische Union vorangebracht. Im Dezember des vergangenen Jahres hat der Europäische Rat dem Land zum ersten Mal eine konkrete Beitrittsperspektive eröffnet. Gleichzeitig einigte man sich mit dem InternationalenWährungsfonds (IWF) auf ein weiteres Beistandsabkommen, mit dem insbesondere die Bedienung der Staatsschulden in den nächsten Jahren gesichert ist. Die Folgen der schweren Finanzkrise im Jahre 2001 scheinen inzwischen weitgehend überwunden. Immer noch ist die Inflationsrate - derzeit rund 9% - zu hoch; jedoch wird es für möglich gehalten, die Maastricht-Kriterien für die öffentlichen Haushalte schon in den nächsten zwei Jahren zu erfüllen. Nach den jüngsten Zahlen lag das Wirtschaftswachstum im vergangenen Jahr bei rund 9%; auch für dieses Jahr wird ein kräftiges Wirtschaftswachstum erwartet. Mit der vorliegenden Analyse sollen einige wichtige Aspekte der wirtschaftlichen Entwicklung in den letzten Jahren und der Stand der durchgeführten Reformen insbesondere im Bankensektor näher betrachtet werden. Es zeigt sich, dass die Wirtschaft der Türkei - auch im Vergleich zur Entwicklung in den der EU zuletzt beigetretenen Ländern - eine durchaus zufriedenstellende Entwicklung aufweist, so dass zumindest aus ökonomischer Sicht die angestrebte mittelfristige Annäherung an eine EU-Mitgliedschaft nicht unrealistisch erscheint.