The paper argues that persistent current account surpluses and increasing foreign currency-denominated asset positions constitute long-term appreciation expectations on yuan and yen, which have made China and Japan vulnerable to U.S. interest rate cuts and appreciation expectation shocks. For...

For a long time, China’s impressive growth performance has been driven by investment and high productivity gains. Based on the recent discussion on possible overcapacities and overinvestment in China, the paper investigates the sustainability of China’s investment- and export-driven growth...