Supervisor(s): Chinese Academy of Social Sciences Sponsor(s): Institute of World Economics and Politics Chinese Academy of Social Sciences CN：11-3799/F
International Economic Review is supervised by Chinese Academy of Social Sciences, and sponsored by Institute of World Economics and Politics, Chinese Academy of Social Sciences. It is the only publication dedicated to publish academic reviews on the international economy in China. It aims to review the international economic and political activities based on China’s position from an academic perspective. Its scope covers international economic and political activities and development, particularly those with an emphasis on the international economic activities related to China. The journal is included in CSSCI.
The Future Fund Australia established in 2006 can be regarded as either a direct measure to tackle unfunded superannuation liability of the public sector or a prudent choice to cope with population ageing. However, compared with other OECD countries, Australia’s need for such a sovereign pension fund is greatly reduced. In fact, it is an important measure to strengthen the medium-term financial position. On the one hand, the fiscal surplus created by the medium-term fiscal strategy provides the original capital for it; on the other hand, the medium-term fiscal strategy restricts the fiscal surplus to be used for tax reduction or social project expenditure increases. By strengthening its independence, the Future Fund has improved its governance, transparency and accountability. Finally, it has not only eliminated the various doubts at home and abroad, but improved its long-term returns.
The paper divides sovereign pension funds into contributory funds and non-contributory ones. The contributory ones are derived from the balance of the basic old-age insurance system operated by the state, while non-contributory ones can be divided into resource-based funds and foreign exchange-based funds. Resource-based sovereign pension funds consist of the yields from a certain kind of exclusive natural resources, such as oil, while foreign exchange-based funds consist of foreign exchange reserves. On the basis of identifying the “sovereignty” characteristics of different pension funds, this paper analyzes the functional positioning of China’s non-contributory sovereign pension fund, the National Social Security Fund, and analyzes the underlying reasons why it is infeasible to build a contributory sovereign pension fund. Finally, the paper argues that China should establish a foreign exchange-based sovereign pension fund as soon as possible for three main reasons. First, with the transformation of China’s economic development, foreign exchange reserves are currently at a turning point, and the window for establishing a “foreign exchange-based” sovereign pension fund is becoming narrower. Second, compared with that in developed countries, the scale of asset reserve of China’s old-age security is too small, and the establishment of foreign exchange-based sovereign pension funds can bridge the funding gap. Third, the current scale of foreign exchange reserves has exceeded the desired level of their specific functions, and the establishment of a “foreign exchange” sovereign pension fund can ensure the goal of repaying the people to improve their well-being can be achieved.
Since the 1970s, UK’s pension reform featuring privatization has continued until today, a process in which the nation’s pension responsibility has been continually transferred to the private sector. The proportion of State Pension as the most important pillar has as a result been on the decline. The accumulation of surplus assets from the balance of the national pension plan contributions and expenditures has led to the formation of the National Insurance Fund. As a typical contributory sovereign pension fund, the UK National Insurance Fund has had liquidity and security as its top priority. After achieving rapid growth in the early 21st century, the fund has seen its surplus continue to decline and stabilize at a low level in recent years and is expected to run out soon and require a lot of financial assistance. The declining surplus is attributable to the decrease in its returns from investment. After the reform that links the fund’s return ratio with the national basic interest rate, the fund suffered the fallout of the global financial crisis and as the country’s benchmark interest rates nosedived, the fund’s return on investment failed to cover the inflation rate. By reviewing, analyzing and discussing the basic conditions, investment operation and characteristics of the UK National Insurance Fund, China can draw lessons from the UK as it carries out the reform of the pay-as-you-go basic pension insurance fund investment management.
Chile was the first country in the world that has introduced private pension system in the 1980s. Since the 21st century, the Chile model has undergone two rounds of reforms. The establishment of the sovereign pension fund in 2006 was an important step to improve the multi-pillar pension system under the transition of the fiscal governance policies. This article illustrates Chile’s pension system reforms since 2006 and analyzes the strategic role of the sovereign pension fund as well as its investment policy. At last, the article points out some lessons from the natural resource-based sovereign pension fund in the Chile model.
Loose monetary policies do not necessarily lead to credit expansion in practice, that is, there is a difference between the so-called loose money and loose credit. The main factor that determines this difference is the risk appetite of commercial banks. China’s financial system is dominated by commercial banks, and the efficiency of its support for the real economy is directly related to the risk appetite of financial institutions. The research of this paper shows that commercial banks’ risk appetite is most closely linked to financial regulatory policies and the real estate prices (main collateral). Given this round of slightly easing monetary policy and continuous slowing credit growth, the trend of strict regulation has not been changed and the real estate market as a whole is in a downward trend. Therefore, commercial banks are under great pressure regarding assets, liabilities and equity. The channel of transmission from loose money to loose credit is not smooth and it will take time for the credit mechanism to be repaired.
It requires the stable banking system and prevention of internal risks to contain systemic financial risks. In recent years, the positive book micro-leverage ratio of Chinese banking sector is in sharp contrast to the “worrisome” macro-leverage ratio. Apparently, the leverage ratio of China’s banking sector has been stable and is improving moderately. The liabilities to assets (L/A) ratio has decreased moderately, the quality of capital has increased significantly, the proportion of equity capital has improved, the capital adequacy ratio and the leverage ratio have all met the standards and the four major domestic banks have performed better than the global systematically important banks in terms of indicators of the leverage ratio. In reality, the real leverage level of China’s commercial banks may have been significantly underestimated. The explosion of off-balance sheet wealth management products, declining credit quality and the leverage linkage of financial institutions have become major risks facing the commercial banks. It is difficult for the banking sector to keep the leverage ratio stable and the structural changes in balance sheet significantly increase regulatory difficulties. That is to say, the current indicators disclosed by banks cannot fully reflect their risks and current regulatory rules have failed to ensure the multiple-layer and penetrating regulation. The “deleveraging” of commercial banks should not equal the repeated reduction of the debt ratio, but a more comprehensive re-assessment of banking risks. In the future, the coordination of micro- and macro- prudential policies and calibration of the leverage ratio will become the new direction of regulation of the banking industry. Regulators should pay attention to both short-term liquidity risks and mid-term and long-term credit risks of commercial banks and prevent a new round of concentrated systemic financial risks caused by excessive deleveraging.
In recent years, China’s overseas cooperation zones in Africa have developed rapidly, which have not only become important platforms for Chinese enterprises to go abroad, but also play a positive role in the economic growth of the host countries. Theoretically, the impact of the cooperation zones on the host-country economy includes: first, in the short term, they can promote the investment, employment and government income of the host countries; second, in the medium term, they can enhance the linkage effect between the Chinese and the host-country enterprises and promote industrial agglomeration; third, in the long term, they will be conducive to the administrative policy experiment of the host countries and promote the construction and long-term development of the market system. In reality, the total output value of China’s overseas cooperation zones in Africa has reached 18.89 billion US dollars, created more than 40000 jobs, formed industrial chains of leather, textile and other industries, and promoted the exploration of some countries to use the cooperation zones to promote industrialization. At the same time, there are still problems in these cooperation zones, including insufficient infrastructure and preferential policies, weak industrial linkage effect, and lack of obvious driving effect on industrialization. The reasons for these problems lie in the financing difficulties of the developer enterprises, the insufficient industrial policies of host-country governments, and the lack of long-term development capacity of African countries. Drawing on China’ experience, the developer enterprises can explore market-oriented financing models, combine preferential policies with infrastructure construction, while the local governments of host countries can improve reasonable industrial policies, enhance the interaction between Chinese enterprises and local enterprises. Meanwhile, the host countries can actively support the development of industry and commerce and enhance their long-term development capacity, which will be the key tasks to promote the economic transformation of the host countries.
