Introduction to The Asian Monetary Policy Forum: Insights for Central Bankers
Financial globalization brings benefits and new sources of economic risk and financial volatility. In response, central bankers have extended their focus beyond price and exchange rate stability to give more attention to the stability and efficiency of the financial system. This expanded domain of concern for central bankers has brought new, often complex, policy challenges. We can learn a great deal from our experiences, sometime harsh, in responding to these challenges and our efforts to address the risks associated with financial globalization. We believe that a deeper understanding can point the way to better policy design and stronger economic performance.
In this spirit, the Monetary Authority of Singapore (MAS), the Asian Bureau of Finance and Economics Research (ABFER), the University of Chicago Booth School of Business, and the National University of Singapore Business School have collaborated since 2014 in organizing the annual Asian Monetary Policy Forum (AMPF). The forum facilitates the exchange of insights among policymakers, practitioners, and senior academicians by delving into pressing monetary policy issues in open-economy settings, with particular attention to Asian countries. The aim is to draw lessons from experience for the benefit of policymakers in Asia and around the world.
The commissioned papers presented at the AMPF offer insights about major developments in the global monetary and financial system, the efficacy of monetary and other policies, and the containment of financial risks. We are grateful to authors, discussants and other participants for their outstanding contributions, and we feel compelled to share the learnings in the broadest possible way. We have compiled the commissioned papers into a book, as a reference to practical and critical thinking about central bank policies in Asia and beyond. We include an edited version of a speech delivered by MAS Managing Director Ravi Menon at the inaugural AMPF.
ADDITIONAL MATERIALS
Post-Lockdown Economic Recovery in China: April and May
This letter documents several facts of China’s post-lockdown economic recovery in April and May. The main findings are summarized as follows.
- Truck flows and online consumption suggest a strong recovery.
- The recovery of online job posts stagnated.
- Smaller firms cut online job posts more dramatically in the first quarter. Such asymmetry became less pronounced in April.
Post-Lockdown Economic Recovery in China: February and March
The Chinese government ended the 76-day lockdown of Wuhan on April 8. Outside Wuhan, many local governments had already eased restrictions on movement and shifted their focus to reviving the economy. This letter documents several facts of the post-lockdown economic recovery in China. The main findings are summarized as follows.
- The official statistics suggest a quick recovery in manufacturing. The bouncing-back of manufacturing can also be seen in non-official data on city-to-city truck flows, active online job posts and air pollution emissions.
- Electricity consumption, retail sales and catering income suggest a much more persistent output decline in services. The business registration data also shows less firm entry in services.
- There is huge cross-region heterogeneity. Our data on visits to key locations and firm entry suggest a stronger recovery in the southeast region.
- Small businesses were hit much harder; their February sales shrank to about 35% of their 2019 level, but have been slowly recovering in March 2020. April will be the key month to determine the recovery speed.
Dealing with a Liquidity Crisis: Economic and Financial Policies in China during the Coronavirus Outbreak
The coronavirus outbreak that began last December sharply curtailed economic activities across China. In response to this sudden, countrywide, and potentially devastating liquidity shock, many coordinated economic and financial policies were initiated by the Chinese authorities to help the economy battle against the epidemic. In particular, policy tools are designed to support small- and medium-sized firms, and industries and regions hit hard by the outbreak. We finally discuss the effectiveness of the policy intervention based on a recent survey which covers a representative sample of public and private firms.
Handbook on China’s Financial System: Chinese Bond Market and Interbank Market
Over the past twenty years, especially the past decade, China has taken enormous strides to develop its bond market as an integral step of financial reform, along with its tremendous effort in interest rate liberalization and internalization of its currency RMB. Due to historical reasons, there are two distinct and largely segmented markets in today’s Chinese bond markets: Over-the-Counter based interbank market, and centralized exchange market. The interbank bond market in China resembles the interbank market observed in developed countries like U.S., while the exchange bond market in China is part of the Stock Exchanges in Shanghai and Shenzhen. Section 4.2 offers a brief history of the development and evolution of these two bond markets. The interbank market is the dominant one within these two markets; at the end of 2018, about 89% of the total bonds outstanding in China are in the interbank market, while the rest of 11% is in the exchange. Various fixed income securities are issued and traded on these two bond markets, with many multi-layer regulatory bodies interacting with each other in an intricate way. We first elaborate on the above mentioned two bond markets in Section 2, together with various bond instruments traded there. Section 3 provides a brief history of Chinese bond markets, and Section 4 highlights their inherent connection with and the banking system, together with the internalization of Chinese bond markets in the near future. Section 5 covers the credit ratings and rating agencies, and Section 6 offers an account of ever-rising default incidents in China starting 2014. We provide some data sources for in-depth study of Chinese bond market in Section 7.
AQLI Update: Is China Winning its War on Pollution?
Four years after Chinese Premier Li Keqiang declared a “war against pollution,” has the government delivered on its promises to improve air quality? Using daily data from more than 200 monitors across the country from 2013 to 2017, we find that China’s most populated areas have experienced remarkable improvements in air quality, ranging from 21 to 42 percent, with most meeting or exceeding the goals outlined in their National Air Quality Action Plan. If these reductions in pollution are sustained, the average Chinese citizen would see their life expectancy increase by 2.4 years relative to 2013. Although China faces a long road ahead to reach national and international air quality standards, these results suggest the country is winning its war on pollution.