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International spillovers of China's structural reforms

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  • Chin-Yoong Wong
  • Yoke-Kee Eng

Abstract

This paper sheds light on the international spillovers of China's reforms in upgrading industrial capabilities, liberalizing capital account, internationalizing the renminbi, and transition to flexible exchange rates. Drawing on two-country New Keynesian model of endogenous entry and portfolio adjustment, we find that China's industrial upgrading that peddles on yuan appreciation lifts all boats through global production network irrespective of capital account convertibility, degree of renminbi internationalization, and exchange rate reform. Feasibility of appreciation-driven upgrading is called into question, however, when renminbi reform and capital account liberalization go in parallel. We also show that international spillovers disappear once renminbi internationalization is associated with liberalized capital account and flexible renminbi exchange rates.

Suggested Citation

  • Chin-Yoong Wong & Yoke-Kee Eng, 2017. "International spillovers of China's structural reforms," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 26(8), pages 955-978, November.
    • Handle: RePEc:taf:jitecd:v:26:y:2017:i:8:p:955-978
    DOI: 10.1080/09638199.2017.1325071
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    Cited by:

    1. Fengming Qin & Junru Zhang & Zhaoyong Zhang, 2018. "RMB Exchange Rates and Volatility Spillover across Financial Markets in China and Japan," Risks, MDPI, vol. 6(4), pages 1-26, October.

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