Abstract
Since the 1980s, new changes have emerged in the economic cycles of world economies. Demand management policies have ironed out cyclical fluctuations, lengthening economic cycles and making them less notable. In contrast, changes in financial markets are more significant. Asset prices often fluctuate sharply over fundamentals, and large-scale international cross-border capital flows bring about debt crises and currency crises. In the operation of the financial system, structure, behavior, regulation, and other factors exhibit procyclical features, amplifying and accelerating small shocks and causing severe economic fluctuations. The impact of financial factors on the real economy is more and more significant and lasting, with the resulting instability changing to the financial side. The cyclical characteristics of finance and economics are more prominent, and any factor affecting financial stability and security may threaten economic security. Financial security has become the core of economic security.
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Notes
- 1.
The financial-economic cycle is a new concept. It refers to sustained fluctuations and cyclical changes formed by financial and economic activities impacted by internal and external factors transmitted through the financial system.
- 2.
Since 1993, the central bank’s main asset classes have undergone significant changes. The proportion of “net foreign assets” to total assets rose from 11.3 % in 1993 to 83.1 % in 2010, and “other depository corporate debt” fell from 70.3 to 3.7 %.
- 3.
The endogenous nature of money supply is more obvious from 2009 to 2010. The growth of base money was 11.4 % in 2009 and 28.7 % in 2010, while broad money growth was 28.7 % for 2009 and 19.0 % for 2010.
- 4.
At the end of 2010, local fiscal revenue was 4 trillion yuan nationwide. Adding tax rebates and transfer payments from the central government of 3.2 trillion yuan, total local fiscal revenue amounted to 7.3 trillion yuan. There was also an additional 3.3 trillion yuan in local government fund revenue.
- 5.
Source: Calculated based on CBRC data from November 2010.
- 6.
Using increases to the risk premium to portray adverse external shocks. The following situation also applies to currency devaluation caused by real shocks such as changes to consumer preferences and nominal shocks such as increasing foreign interest rates.
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He, D. (2016). The Hidden Dangers and Risks to China’s Currency Security. In: Financial Security in China. Research Series on the Chinese Dream and China’s Development Path. Springer, Singapore. https://doi.org/10.1007/978-981-10-0969-3_2
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