The Research on Financial variables’ Influence on Net Foreign Assets

Based on the rapid development of the financial integration and the emergence of global imbalances, this paper takes 49 countries multinational panel data from 1980-2011 as research samples and the state net foreign assets as the research object. In the perspective of financial integration, in order to find out the effect of financial variables on the net foreign assets, we also introduce the financial development, financial structure and financial opening variables. Through research, we can conclude that financial integration and financial opening both supplement each other, the optimization of financial structure helps to improve a country's foreign net imbalance situation, and a country's financial structure can be optimized with the improvement of integration. So we believes that China should (1) increase the diversification of foreign exchange reserves and promote the internationalisation of the renminbi. (2) Improve domestic savings-investment mechanism, develop the multi-level financial market, and improve the efficiency of the financial system and the level of innovation. (3) Reform the system of capital controls and strengthen cooperation with emerging economies, thus improving our foreign net imbalance, and achieving a smooth transition of developing countries to developed countries.

How Does Financial Opening Affect Industrial Efficiency? The Case of Foreign Bank Entry in the People's Republic of China

This paper analyzes the effects of foreign bank entry on industrial efficiency in the People's Republic of China (PRC) as a case study of financial opening. The study reveals an overall positive impact on the industry. However, the effects vary across ownership groups: negative for state and collective sectors, positive for private enterprises, and insignificant for foreign-invested firms. These findings are incompatible with predictions based on the “cream-skimming effect” and information asymmetry. We investigate two transmission channels of the policy effects—via an easing of financing constraints and through increased competition. Foreign bank entry, like financial liberalization, reverses the effects of repressive financial policy, which protects the state sector but discriminates against private enterprises. While enhancing bank competition can be an effective way to support private sector development, the state sector deserves close attention in order to ensure a smooth transition. This case study should offer some useful lessons for future financial opening.