The paper examines the usage of the Renminbi (RMB) as an international payment currency. Globally, the use of RMB remains small, accounting for 2 percent of total cross-border transactions. Using country-level transaction data from Swift** for 2010–21, we find significant regional variations in the use of RMB for cross-border payments. While RMB is little used in some regions, it has gained traction in others, and these cross-country differences have widened over the years. Such differences can be partly explained by an economy’s geographic distance, political distance, and trade linkages with China. However, it also reflects the impact of policy measures by the People’s Bank of China, including establishing bilateral swap lines and offshore clearing banks. Both policy measures helped to address offshore RMB liquidity shortages given China’s overall capital account restrictions, with the offshore clearing banks having a quantitatively larger impact. Our analysis contributes to a better understanding of the growing importance of RMB within the international monetary system.

The “middle-income trap” is the phenomenon of hitherto rapidly growing economies stagnating at middle-income levels and failing to graduate into the ranks of high-income countries. In this study we examine the middle-income trap as a special case of growth slowdowns, which are identified as large sudden and sustained deviations from the growth path predicted by a basic conditional convergence framework. We then examine their determinants by means of probit regressions, looking into the role of institutions, demography, infrastructure, the macroeconomic environment, output structure and trade structure. Two variants of Bayesian Model Averaging are used as robustness checks. The results—including some that indeed speak to the special status of middle-income countries—are then used to derive policy implications, with a particular focus on Asian economies.

China is transitioning to a greener, more inclusive, more consumer and service based, and less credit-driven economy. This paper defines a framework for assessing rebalancing, reviews progress, and discusses medium-term prospects. External rebalancing has advanced well, while progress on internal rebalancing has been mixed, with substantial progress on the supply side, moderate progress on the demand side, and limited progress on the credit side. Rebalancing on income equality and environment has also been mixed, with the energy intensity of growth falling and labor’s share of income rising, but income inequality and local air pollution remaining very high. Going forward, the high national saving is expected to fall owing to demographic change and a stronger social safety net, while the investment ratio is expected to fall similarly, with increasing competition and profit normalization as growth slows. The service sector will continue to gain importance, helping reduce the carbon intensity of output and increase labor’s share of national income and household consumption. Reducing the credit intensity of growth is likely to progress slowly unless decisive corporate restructuring and SOE reforms are implemented.

China’s digital economy has expanded rapidly in recent years. While average digitalization of the economy remains lower than in advanced economies, digitalization is already high in certain regions and sectors, in particular e-commerce and fintech, and costal regions. Such transformation has boosted productivity growth, with varying impact on employment across sectors. Going forward, digitalization will continue to reshape the Chinese economy by improving efficiency, softening though not reversing, the downward trend of potential growth as the economy matures. The government should play a vital role in maximizing the benefits of digitalization while minimizing related risks, such as potential labor disruption, privacy infringement, emerging oligopolies, and financial risks.

While the global usage of currencies other than the U.S. dollar and the euro for cross-border payments remains limited, rapid technological (e.g. digital money) or geopolitical changes could accelerate a regime shift into a multipolar or more fragmented international monetary system. Using the rich Swift database of cross-border payments, we empirically estimate the importance of legal tender status, geopolitical distance, and other variables vis-à-vis the large inertia effects for currency usage, and perform several forecasting simulations to better understand the role of these variables in shaping the future payments landscape. While our results suggest a substantially more fragmented international monetary system would be unlikely in the short and medium term, the impact of new technologies remains highly uncertain, and much more rapid geopolitical developments than expected could accelerate the transformation of the international monetary system towards multipolarity.

China’s high national savings rate—one of the highest in the world—is at the heart of its external/internal imbalances. High savings finance elevated investment when held domestically, or lead to large external imbalances when they flow abroad. Today, high savings mostly emanate from the household sector, resulting from demographic changes induced by the one-child policy and the transformation of the social safety net and job security that occured during the transition from planned to market economy. Housing reform and rising income inequality also contribute to higher savings. Moving forward, demographic changes will put downward pressure on savings. Policy efforts in strengthening the social safety net and reducing income inequality are also needed to reduce savings further and boost consumption.

Using three distinct approaches—statistical filtering, production function, and multivariate model— this paper estimates potential growth for China, India, and five ASEAN countries (Indonesia, Malaysia, the Philippines, Thailand, and Vietnam) during 1993–2013. The main findings include: (i) both China and India have recently exhibited a slowdown in potential growth, largely reflecting a decline of total factor productivity (TFP) growth; (ii) by contrast, trend growth for the five ASEAN countries has been rather stable and might even have increased marginally, with the notable exception of Vietnam;(iii) over the longer term, demographic factors will be much more supportive in India and some ASEAN economies than in China, where working-age population should start shrinking, with the overall dependency ratio climbing by the end of this decade. Improving or sustaining potential growth calls for broad structural reforms.

After decades of increasing global economic integration, the world is facing a growing risk of geoeconomic fragmentation, with potentially far-reaching implications for the global economy and the international monetary system. Against this background, this paper studies how geopolitical proximity, along with other economic factors, affects the usage of five SDR currencies in cross-border transactions. Since World War II, the global currency landscape has remained relatively stable, with the U.S. dollar serving as the dominant currency. Using country-level SWIFT transaction data, our analysis confirms the importance of inertia, trade and financial linkages in shaping the currency landscape, consistent with existing studies. On geopolitical proximity, we find that closer proximity can boost the use of the euro and renminbi, notably among emerging market and developing economies, although the impact is rather muted in the full sample. The effect on RMB usage in the full sample is more pronounced during periods of heightened trade policy uncertainty. These findings suggest that in a more geoeconomically fragmented world, alternative currencies could play a greater role.

In recent years, macroprudential policy has become an increasingly active policy area. Many countries have adopted it as a tool to safeguard financial stability, in particular to deal with the credit and asset price cycles driven by global capital flows. This paper reviews the use of key macroprudential instruments and capital flow measures in 13 Asian economies and 33 economies in other regions since 2000, and constructs various macroprudential policy indices, aggregating sub-indices on key instruments. Asian economies appear to have made greater use of macroprudential tools, especially housing-related measures, than their counterparts in other regions. The effects of macroprudential policy are then assessed through an event study, cross-country macro panel regressions and bank-level micro panel regressions. The analysis suggests that macroprudential policy and capital flow measures have helped curb housing price growth, equity flows, credit growth, and bank leverage. The instruments that have been particularly effective in this regard include loan-to-value ratio caps, housing tax measures, and foreign currency-related measures.

China’s growth potential has become a hotly debated topic as the economy has reached an income level susceptible to the “middle-income trap” and financial vulnerabilities are mounting after years of rapid credit expansion. However, the existing literature has largely focused on macro level aggregates, which are ill suited to understanding China’s significant structural transformation and its impact on economic growth. To fill the gap, this paper takes a deep dive into China’s convergence progress in 38 industrial sectors and 11 services sectors, examines past sectoral transitions, and predicts future shifts. We find that China’s productivity convergence remains at an early stage, with the industrial sector more advanced than services. Large variations exist among subsectors, with high-tech industrial sectors, in particular the ICT sector, lagging low-tech sectors. Going forward, ample room remains for further convergence, but the shrinking distance to the frontier, the structural shift from industry to services, and demographic changes will put sustained downward pressure on growth, which could slow to 5 percent by 2025 and 4 percent by 2030. Digitalization, SOE reform, and services sector opening up could be three major forces boosting future growth, while the risks of a financial crisis and a reversal in global integration in trade and technology could slow the pace of convergence.