<abstract xmlns="http://www.w3.org/1999/xhtml"><p>This paper attempts to discern the macroeconomic policy options open to China after its stock market crash in August 2015. While several facts and figures on different facets of the Chinese economy keep pouring in – high levels household savings, rising indebtedness of private sector, slowing GDP growth rates, contracting current account surplus, and many more – it is difficult to get a holistic picture of the Chinese macroeconomy and the policy options that it has in wake of the significant changes taking place. The Sectoral Financial Balances (SFB) model, which has its basis in a simple accounting identity, provides a simple, consistent and logical framework that can help us work through the fog and put these facts and figures in perspective. At the same it allows us to trace the movement of the economy through time and draw insights into the possible trajectory of the economy given trends in various macroeconomic parameters. From our analysis, can we say that China is heading towards a major crisis? And what could be the possible policy response of the Chinese government in averting such a crisis? These are important questions that need urgent answers.</p></abstract>

This paper attempts to discern the macroeconomic policy options open to China after its stock market crash in August 2015. While several facts and figures on different facets of the Chinese economy keep pouring in – high levels household savings, rising indebtedness of private sector, slowing GDP growth rates, contracting current account surplus, and many more – it is difficult to get a holistic picture of the Chinese macroeconomy and the policy options that it has in wake of the significant changes taking place. The Sectoral Financial Balances (SFB) model, which has its basis in a simple accounting identity, provides a simple, consistent and logical framework that can help us work through the fog and put these facts and figures in perspective. At the same it allows us to trace the movement of the economy through time and draw insights into the possible trajectory of the economy given trends in various macroeconomic parameters. From our analysis, can we say that China is heading towards a major crisis? And what could be the possible policy response of the Chinese government in averting such a crisis? These are important questions that need urgent answers.

China’s Macroeconomic Policy Options: A Sectoral Financial Balances Perspective

School of Business Management, Narsee Monjee Institute of Management Studies, Bengaluru, India

Studies in Business and Economics

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

This paper attempts to discern the macroeconomic policy options open to China after its stock market crash in August 2015. While several facts and figures on...

China’s Macroeconomic Policy Options: A Sectoral Financial Balances Perspective

Published Online: Jun 29, 2016

Page range: 152 - 163

DOI: https://doi.org/10.1515/sbe-2016-0013

Keywords
China, macroeconomic policy, Sectoral financial balances, fiscal deficit, stock market crash

© 2016 Sivramkrishna Sashi, published by De Gruyter Open

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

China’s Macroeconomic Policy Options: A Sectoral Financial Balances Perspective

Published Online: Jun 29, 2016

Page range: 152 - 163

DOI: https://doi.org/10.1515/sbe-2016-0013

KeywordsChina, macroeconomic policy, Sectoral financial balances, fiscal deficit, stock market crash

© 2016 Sivramkrishna Sashi, published by De Gruyter Open

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
China, macroeconomic policy, Sectoral financial balances, fiscal deficit, stock market crash