1/8
This is a pretty good article about Beijing’s attempt – yet again but this time with more urgency – to rebalance demand domestically.
politico.eu/article/china-…
This is a pretty good article about Beijing’s attempt – yet again but this time with more urgency – to rebalance demand domestically.
politico.eu/article/china-…
2/8
I think however that the article might downplay the most important point – the same one faced by every country that has had to adjust after an investment-driven growth “miracle”: while China must eventually rebalance demand away from investment and export dependence, and...
I think however that the article might downplay the most important point – the same one faced by every country that has had to adjust after an investment-driven growth “miracle”: while China must eventually rebalance demand away from investment and export dependence, and...
3/8
towards domestic consumption, this cannot happen except as part of a major social and political transformation.
That’s because there is no trick to rebalancing demand in China. It must shift income equal to at least 10-15% of GDP from businesses, rich people and the...
towards domestic consumption, this cannot happen except as part of a major social and political transformation.
That’s because there is no trick to rebalancing demand in China. It must shift income equal to at least 10-15% of GDP from businesses, rich people and the...
4/8
government to ordinary households, and the longer it takes, the greater the build-up of debt and the concurrent overstatement of GDP.
But no country in history has managed such a shift without undergoing significant – often disruptive – social and political changes.
government to ordinary households, and the longer it takes, the greater the build-up of debt and the concurrent overstatement of GDP.
But no country in history has managed such a shift without undergoing significant – often disruptive – social and political changes.
5/8
That’s why all the exhortations in the world will have no effect. Only major wealth transfers matter, and these require significant political reform or disruptive adjustments.
One minor problem with this article is that it confuses household savings with national...
That’s why all the exhortations in the world will have no effect. Only major wealth transfers matter, and these require significant political reform or disruptive adjustments.
One minor problem with this article is that it confuses household savings with national...
6/8
savings, for example when it says: “When Chinese households do have cash to spare, they tend to hold on to it. Savings surged to a peak of 52 percent of gross domestic product in 2008 before the financial crisis hit, and still stand at around 45 percent.”
savings, for example when it says: “When Chinese households do have cash to spare, they tend to hold on to it. Savings surged to a peak of 52 percent of gross domestic product in 2008 before the financial crisis hit, and still stand at around 45 percent.”
7/8
The problem is not that Chinese tend to hold on to their cash: it is that they receive too small a share of what they produce, whether or not they save it, which is also why the main solution is not, as one analyst cited here claims, to build a better social safety net.
The problem is not that Chinese tend to hold on to their cash: it is that they receive too small a share of what they produce, whether or not they save it, which is also why the main solution is not, as one analyst cited here claims, to build a better social safety net.
8/8
Improving the social safety net will help, of course, but only because it is one of the ways income can be transferred to ordinary Chinese, but even the best social safety net in the world won’t drive China to more than a fraction of the necessary rebalancing.
Improving the social safety net will help, of course, but only because it is one of the ways income can be transferred to ordinary Chinese, but even the best social safety net in the world won’t drive China to more than a fraction of the necessary rebalancing.
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