September 2019

By Sanvi Avouyi-Dovi, Pierre Bui-Quang et Pierre Sicsic

The primary income surplus has been growing for several years. Since 2010, the increase of around EUR 10 billion in the income of French residents working abroad has been higher than that of direct investment (DI) income. The improvement in the income balance is now driven by employee compensation.

Chart 1: A significant improvement in the balance of compensation of cross-border commuters since 2010
Chart 1: A significant improvement in the balance of compensation of cross-border commuters since 2010 Source: Banque de France’s Annual Report on the Balance of Payments. Note: primary income surplus expressed in billions of euro (EUR bn). PI: Portfolio investment; OI: Other investment

By Irena Peresa and Edouard Vidon

Amid slowing growth and corporate deleveraging, State intervention in certain Chinese banks is again on the table. 20 years ago, asset management companies (AMCs) were set up to bolster the largest lenders, but their purpose has radically changed since. To address current bad loan issues, the priority should be to develop the secondary NPL market.

Figure 1: Four AMCs were originally set up to bolster the largest state-owned banks Source: Authors

By Yannick Kalantzis and Camille Thubin

The trade balance as a share of GDP reflects decisions regarding consumption, and therefore saving, and investment. Over the past 40 years, its dynamics in France have been dominated by the cycle of construction: the balance deteriorates in boom phases. The rise in household saving, which contributed to the surplus of the 1990s, was offset after the crisis by a higher share of government consumption in GDP.

Chart 1: Contributions to the Trade Balance,% of GDP in deviation from 1981
Chart 1: Contributions to the Trade Balance,% of GDP in deviation from 1981 Source: INSEE.

What are French banks and insurers doing to prepare for climate change? Where do they stand in terms of implementing France’s Energy Transition Law? Our analyses show significant though mixed progress with regard to transparency and governance of risks, and a growing but still incomplete recognition of climate risk as a financial risk.

Chart 1: Geographical breakdown of the exposures of French banks
Chart 1: Geographical breakdown of the exposures of French banks Source: ACPR. Note: as a percentage of total outstanding amounts for the 7 main French banks at 30 June 2018

By Philippe Aghion (Collège de France and LSE), Antonin Bergeaud (Banque de France), Richard Blundell (UCL and IFS) and Rachel Griffith (University of Manchester and IFS)

Technical progress forces workers to adapt to new production methods. It thus favours the most highly skilled workers as they earn relatively higher wages than the least skilled. However some less qualified employees can also benefit from these technical changes provided, they have the skills sought after by innovative firms.

Chart 1: Average hourly wage by age and skill level for low-skilled occupation workers in innovative and non-innovative firms
Chart 1: Average hourly wage by age and skill level for low-skilled occupation workers in innovative and non-innovative firms Note: Data for the United Kingdom taken from the Annual Survey of Hours and Earnings, matched to the Business Expenditure on Research and Development survey (2004-2016). Hourly wages in GBP on a logarithmic scale. Source: Aghion et al. (2019).

Overall, French prudential policies entail a reduction in foreign banks’ lending to French residents. Yet some measures may lead to undesired leakages that potentially undermine authorities’ goals: foreign bank affiliates’ exposure to France rose by 1.1% (up EUR 1.5 billion) on average over 2011-17 owing to the implementation of Basel capital requirements.

Chart 1: Foreign banks’ exposures to France (as a % of total bank debt of French residents)
Chart 1: Foreign banks’ exposures to France (as a % of total bank debt of French residents) Source: BIS Consolidated Banking Statistics (CBS) – Immediate Borrower (IB) and authors’ calculations.