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CMR of Xiamen University. Strategy, Value and Risk. In conclusion, we believe that the various constraints highlighted in this note need to be addressed in order to reinvigorate economic growth in sub-Saharan Africa. Nonetheless, banks in Africa are evolving and we continue to see vast opportunities for emerging market investors.

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There are hundreds of African manufacturers with limited distribution looking for an overseas market. Importing their goods is the place to start your business. More information here. Primary Navigation. The main constraints are outlined below: Inefficiencies in the banking sector.

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With the downsizing of the former and the expansion of the later, labor productivity grew. As a result, high returns to capital could be maintained despite growing capital inputs, which seemingly contradicts the wisdom of traditional neoclassical models. In China, the state-owned sector faces soft budget constraints and has better access to external credit.

Meanwhile, private firms are subject to strong discrimination in the credit market and rely heavily on internal financing for further development. With a growing private sector against a shrinking state-owned sector, discrepancies between deposits and bank loans increase. A growing share of the intermediated funds is invested in foreign bonds, contributing to growing foreign surplus.

Foreign assets in China are mostly short-term federal reserves with low returns, while liabilities are primarily long-term FDI with high returns, leading to dynamic inefficiency of the macro-economy. Progress in market-oriented reforms in the financial market is critical to improving allocation efficiencies of financial resources. To speed up industrialization and prioritize development of capital-intensive industries, prices of agricultural goods, labor and capital were depressed.

As a result, profits of state-owned enterprises SOEs increased, accelerating aggregate accumulation of capital. Marked by the significant growth in rural industry and the establishment of a consumption-driven growth pattern, rural China, in the s, constituted the engine for reforms and economic growth.

The pricing system of agricultural goods and land systems was reformed in the rural areas, creating large-scale surplus labor in the agricultural sector. This resulted in the growth of rural workers in township and village enterprises TVEs and bolstered TVEs tremendous growth. TVEs constituted the catalyst for economic transition in China because they not only promoted economic growth in the s, but also reduced rural-urban income inequality and intensified market competition. In the mids, promoted by the global division of labor along the global value chain, export-oriented manufacturing industries in China grew significantly, and exports instead of consumption became the new growth engine.

Labor with relatively low cost and high productivity are the main reason. On the one hand, large-scale rural-urban migration began in the mids, and for the first time in history, surplus labor from inland China was leveraged by global capital in the coastal area. On the other hand, beginning in Shanghai, in July , the labor market reform, which was marked by the establishment of re-employment service centers for separating surplus employees of SOEs, was officially initiated.

As the employment status of urban residents diversified, labor productivity in industry and services increased rapidly. On the other hand, low domestic consumption, together with tremendous growth in production, led to over-capacity, which can be absorbed only by exports. The trade dependency ratio in China kept rising. Risks due to dual imbalances were disguised by rapid economic growth before In , the global financial crisis broke out, and the resulting shrinking external demand, together with an ageing population, made the export-driven growth model unsustainable.

With fiscal expansion and accommodating monetary policies, financial resources were allocated to investments in infrastructure and real estate, leading to significant expansion in the balance sheet. Soft budget constraints and asset price bubbles made local governments and real estate companies insensitive to interest rates. As a result, asset prices soared within a short period of time. Investments in the real sector are crowded out by speculative investments, jeopardizing sustainable growth in China.

Factor market reforms do not necessarily lead to gains in dynamic efficiency because factor prices are influenced significantly by expectations, and expectations may amplify risks.

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In factor market reforms, there is always a trade-off between marketization and government intervention. Unregulated marketization is risky, and there is no textbook answer to what constitutes the best mix of regulatory interventions. To improve government regulation in the context of marketization, a dynamic perspective should be taken.

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The trade-off between marketization and government regulation in these markets challenges most countries, even those with highly developed and sophisticated financial markets, as in the US. The financial crisis in is evidence of regulatory failures in the U. Speculative investment and arbitrage prevailed in the financial markets, crowding out investment in the real economy.

Not only was allocative efficiency reduced; financial risks were raised as well. Therefore, despite the fact that market-oriented reforms in the financial markets improved allocative efficiency, their magnitudes, scope and sustainability are questionable, in retrospect. Under soft budget constraints and asset price bubbles, local governments are insensitive to interest rates. As a result, even if prices of financial resources are determined fully by market rules, allocative efficiency still cannot be improved.

Financial market liberalization without addressing soft budget constraint issues would increase risks and undermine efficiency gains in the financial market. However, similar to the financial market, reforms in the land market do not necessarily lead to dynamic efficiency gains. In urban China, the land market is always linked to the real estate market. The market-oriented reform in the real estate market, in , brought huge vitality to the Chinese economy.

However, growing local fiscal deficits induced local governments to become increasingly more dependent revenues from land sales. As a result, it is expected that the housing price bubble in China can be efficiently managed, and inflows of financial resources to the real estate market are thus further encouraged. Bubbles in the real estate market not only raise risks for the macro-economy, but also crowd out investments in other sectors, distorting land allocation and constraining dynamic efficiency gains.

Land capitalization in rural areas will definitely boost economic growth in China tremendously, like what happened in the urban real estate market in However, the success of land capitalization and the sustainability of efficiency gains depend crucially on policy improvements such as the hukou system. Market-oriented reforms in rural areas, in the s, marked the starting point of sustainable growth in China. Reforms in the pricing system of agricultural goods, implementation of the household responsibility system, which sustains the public ownership of land while production and management decisions are granted to households through signing long-term contracts, provided an impetus for the early development of TVEs.

TVEs played essential roles in creating employment, enhancing rural household income, and reducing the poverty rate. In addition, the earliest forms of partial financial deregulation were also implemented in rural China in the s. Informal finance emerged under deliberate and proactive policy incentives, and rural entrepreneurs gained easier access to formal and informal financing.