The People’s Republic of China and Global Imbalances from a View of Sectorial Reforms

Hiro Ito, Ulrich Volz
JEL codes: 
ADBI Working Paper Series

This paper examines the impact of sectorial reforms on current account imbalances, with a
special focus on the People’s Republic of China (PRC). In particular, we investigate to what
extent reforms pertaining to the financial sector, social protection, and healthcare may
contribute to a rebalancing of the PRC’s persistent current account imbalances. Our forecasting
results suggest that reforming the financial sector would be a significant contributor to the
country’s rebalancing with an effect much larger than that of capital account liberalization.
Strengthened provisions of social protection and publicly-funded healthcare are also found to
contribute to a rebalancing of the PRC economy.