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China’s emergence as a major player in world trade is well known, but its growing role inglobal finance might have been underappreciated. China is the second largest creditor in theworld today, with a net creditor position of 30 percent of GDP in 2008. We test the importanceof the growth differential, demographics, government debt, financial depth and the exchangerate in shaping China’s net foreign asset position. Our empirical results highlight the sharpfall in the young-age dependence as one key driver behind China’s puzzlingly large netlender position and also confirm the neoclassical prediction that faster growth attracts morecapital inflows. Looking ahead, our findings suggest that China will unlikely turn into ameaningful net debtor nation over the next two decades.
China’s emergence as a major player in world trade is well known, but its growing role inglobal finance might have been underappreciated. China is the second largest creditor in theworld today, with a net creditor position of 30 percent of GDP in 2008. We test the importance of the growth differential, demographics, government debt, financial depth and the exchangerate in shaping China’s net foreign asset position. Our empirical results highlight the sharpfall in the young-age dependence as one key driver behind China’s puzzlingly large netlender position and also confirm the neoclassical prediction that faster growth attracts more capitalital inflows. Looking ahead, our findings suggest that China will unlikely turn into ameaningful net debtor nation over the next two decades.