'China’s Transparency Challenges'

Ben Bernanke and Peter Olson:

China’s transparency challenges: At the recent G20 gathering in Shanghai, three Chinese leaders—Premier Li Keqiang, People’s Bank of China Governor Zhou Xiaochuan, and Finance Minister Lou Jiwei—reassured attendees that the Chinese government had the monetary and  fiscal tools as well as the know-how to guide the economy through its current challenges. The success of the communications offensive, which seems to have calmed investor concerns for the moment, stands in strong contrast to the communications missteps that exacerbated adverse market reactions to the Chinese government’s stock market and currency interventions over the past year.

These statements at the G20 suggest that Chinese officials are better understanding the need to clearly explain major policy initiatives—a difficult transition for a government accustomed to secrecy. However, communication of this sort represents only one form of transparency. In this post we discuss two other important forms that complement clear explanations by policymakers: data transparency (producing believable numbers), and transparency about the rules of the game (being clear about rules and policies that affect participants in commerce, the markets, etc.). For China to fulfill its potential as a global financial and economic leader, it needs to make further progress on these dimensions as well. ...