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  • Print publication year: 2008
  • Online publication date: July 2010

Introduction: China Today and Lessons from the Past


Shanghai, the Paris of the East!

Shanghai, the New York of the West!

Shanghai, the most cosmopolitan city in the world…

(All About Shanghai and Environs – a 1934 guidebook)

For decades China's economic progress was stifled and hidden from the rest of the world behind Chairman Mao's “bamboo curtain.” However, the remarkable growth over the post-1978 reform period has launched the country into a major player in the world economy. By 2007, the Shanghai Stock Exchange had reached center stage with coming initial public offerings that looked likely to rival, or even exceed, those of New York. Many tough challenges remain nonetheless, including the sustainability of China's exchange rate policy and the soundness of a financial system that is still dominated by four big state-owned banks. This book addresses some of the key monetary challenges to China's continued advancement, such as potential inflationary pressures under the continued buildup of foreign exchange reserves, the need for additional liberalization of interest rates and financial market development, and external pressure for faster exchange rate adjustment.

Such issues as the causes and consequences of exchange rate pressures are interpreted in terms of standard economic principles and past experiences – taking into account some illustrative lessons deriving from events in China's own history prior to the days of the bamboo curtain. Besides considering how past lessons help put current pressures in perspective, this book looks forward to the ongoing challenges posed by China's accession to the World Trade Organization and the potential for Chinese monetary hegemony within the Asian sphere.