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Three main features characterize the international financial integration of China and India. First, while only having a small global share of privately-held external assets and liabilities (with the exception of China's foreign direct investment liabilities), these countries are large holders of official reserves. Second, their international balance sheets are highly asymmetric: both are "short equity, long debt." Third, China and India have improved their net external positions over the past decade although, based on their income level, neoclassical models would predict them to be net borrowers. Domestic financial developments and policies seem essential in understanding these patterns of integration. These include financial liberalization and exchange rate policies, domestic financial sector policies, and the impact of financial reform on savings and investment rates. Changes in these factors will affect the international financial integration of China and India (through shifts in capital flows and asset and liability holdings) and, consequently, the international financial system.

Balance Sheets --- Bank Policy --- Borrowers --- Capital Flows --- Currencies and Exchange Rates --- Debt --- Debt Markets --- Economic Theory and Research --- Emerging Markets --- Equity --- Exchange --- Exchange Rate --- External Assets --- Finance and Financial Sector Development --- Financial Developments --- Financial Liberalization --- Financial Literacy --- Holdings --- Income Level --- International Financial Integration --- International Financial System --- Investment --- Investment and Investment Climate --- Investment Rates --- Liabilities --- Macroeconomics and Economic Growth --- Private Sector Development --- Reserves --- Share

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This paper sketches a macroeconomic scenario for China for 2010-20. Growth accounting exercise finds that, with both the working population and total factor productivity on course to decelerate, potential gross domestic product (GDP) growth is likely to moderate in the coming 10 years, despite still sizeable capital deepening. Actual GDP should grow broadly as fast as potential GDP, continuing the track record since the late 1990s. With some rebalancing expected, the share of consumption in GDP is likely to bottom out and to rise somewhat through 2015 while the share of investment edges down. Robust economic growth in China would support imports. Meanwhile, given the outlook for the world economy, the share of exports in GDP may decline in 2010-2015 despite good competitiveness. As a result, the trade surplus may diminish relative to the size of China's economy. Even so, the external surplus will continue to rise in US dollar terms, especially the current account. In 2020 China's GDP per capita will be broadly comparable to the current level in Latin America, Turkey, and Malaysia. Adjusted for purchasing power, in 2020 China's GDP per capita will be one-fourth of the US level and China's total economy larger than that of the US. The pace of catch up in current prices and market exchange rates will depend on the extent of real exchange rate (RER) appreciation. Past experience internationally suggests that, with a large portion of labor employed in agriculture, RER appreciation may be modest in the coming decade. However, demographic changes may speed up the tightening of the labor market and trend RER appreciation. Reflecting this uncertainty, two scenarios are presented, suggesting China may become the largest economy on this metric sometime between 2020 and 2030.

Accounting --- Agriculture --- Commodity Prices --- Debt Markets --- Developing Countries --- Economic Growth --- Economic theory & Research --- Economies of Scale --- Exchange Rates --- External Assets --- Finance and Financial Sector Development --- Financial Crisis --- Financial Sector --- Financial Stability --- Gdp --- Global Economy --- Household Income --- Human Capital --- Inflation --- Infrastructure Investment --- Job Creation --- Labor Market --- Land Reform --- Liberalization --- Living Standards --- Local Government --- Macroeconomics and Economic Growth --- Mortgages --- Purchasing Power --- Side Effects --- Total Factor Productivity --- Urbanization --- Wages

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After more than a decade of experience and research on financing arrangements in post conflict countries and fragile states, a consensus has emerged on at least one matter. The core objective is to build effective and legitimate governance structures that secure public confidence through provision of personal security, equal justice and the rule of law, economic well-being, and essential social services including education and health. These governance structures are necessary to ensure that countries do not turn, or turn back, to violence as a means of negotiating state-societal relations. This paper discusses a number of the weaknesses in current financing arrangements for post conflict countries and fragile states, with a focus on Official Development Assistance (ODA). We argue that tensions persist between business-as-usual development policies on the one hand and policies responsive to the demands of peace building on the other. The preferential allocation of aid to 'good performers,' in the name of maximizing its payoff in terms of economic growth, militates against aid to fragile and conflict-affected states. If the aim of aid is redefined to include durable peace, the conventional performance criteria for aid allocation lose much of their force. Compelling arguments can be made for assistance to 'poor performers' if this can help to prevent conflict. Yet the difficulties that initially prompted donors to become more selective in aid allocation remain all too real. Experience has shown that aid can exacerbate problems rather than solving them.

Access to Finance --- Accountability --- Accounting --- Arbitration --- Capacity Building --- Civil Society Organizations --- Conflict and Development --- Consensus --- Constituencies --- Corruption --- Credibility --- Debt Markets --- Developing Countries --- Development Economics & Aid Effectiveness --- Economic Development --- Economic Liberalization --- Elections --- Expenditures --- External Assets --- Finance and Financial Sector Development --- Fiscal Sustainability --- Foreign Aid --- Foundations --- Good Governance --- Governance --- Human Resources --- Human Rights --- International Cooperation --- International Donors --- International Finance --- Legal System --- Macroeconomics and Economic Growth --- National Governance --- Needs Assessment --- Observers --- Opportunity Cost --- Peace & Peacekeeping --- Peacebuilding --- Polarization --- Political Economy --- Political Institutions --- Post Conflict Reconstruction --- Public & Municipal Finance --- Public Finance --- Public Health --- Public Sector --- Roads --- Rule of Law --- Strategic Planning --- Tax Administration --- Tax Evasion --- Tax Policy --- Tax Reform --- Trade Liberalization --- Transaction Costs --- Transparency --- Violence

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Many countries in the Latin America and the Caribbean (LAC) region, especially in South America, fared well during the global crisis and are now on a strong growth path. The region s recession in 2009 was relatively short lived and, with the notable exception of Mexico, remarkably mild. The current pace of economic recovery is exceeding expectations, with gross domestic product (GDP) projected to grow in the 5-6 percent range in 2010. This report discusses LAC's newfound resilience in the midst of financial globalization, examining key features of the cyclical behavior of LAC economies in comparison to other emerging economies and to its own past. Resilience is defined throughout this report in a broad sense to denote the ability of an economy to navigate with minimum disturbances through shocks, cushioning their negative spillovers in bad times, and recovering fast after a downturn. The report is structured as follows: first, it evaluates the relative performance of LAC countries during the contractionary period generated by the recent global crisis, to shed light on LAC's ability to shield its economies or soften the blow of a large external shock. Second, a similar exercise is conducted for the recovery phase of the cycle, when in the aftermath of an external shock more resilient countries will be expected to have a faster and more robust recovery. Third, it takes a deeper look at the different driving forces behind the recovery, including the role of domestic demand, commodity prices, and the connection to emerging Asia. Fourth, it provides evidence of the ability of different countries in LAC to conduct counter-cyclical policies in response to the global financial crisis. Lastly, a concluding section warns about the main macro-financial tensions and challenges lying ahead for the region.

Adverse Effects --- Business Cycles and Stabilization Policies --- Capacity Building --- Capital Flows --- Central Banks --- Collateral --- Commodity Prices --- Credibility --- Currencies and Exchange Rates --- Debt --- Debt Management --- Developing Countries --- Domestic Debt --- Economic Conditions and Volatility --- Economic Forecasting --- Economic Growth --- Equity Markets --- Exchange Rates --- Expenditures --- Exporters --- External Assets --- External Shocks --- Finance and Financial Sector Development --- Financial Crisis --- Financial Institutions --- Financial Policy --- Fiscal Policy --- Foreign Banks --- Global Economy --- Globalization --- Housing Finance --- Inflation --- Interest Rates --- Labor Market --- Macroeconomics and Economic Growth --- Monetary Policy --- Natural Resources --- Risk Aversion --- Trade Finance --- Transparency