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How to Sustain the Chinese Economic Miracle? The Risk of Unraveling the Global Rebalancing

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  • Jorg Bibow

Abstract

This paper investigates China’s role in creating global imbalances, and the related call for a massive renminbi revaluation as a (supposed) panacea to forestall their reemergence as the world economy recovers from severe crisis. We reject the prominence widely attributed to China as a cause of global imbalances and the exclusive focus on the renminbi-dollar exchange rate as misguided. And we emphasize that China's response to the global crisis has been exemplary. Apart from acting as a growth leader in the global recovery by boosting domestic demand to offset the slump in exports, China has in the process successfully completed the first stage in rebalancing its economy, which is in stark contrast to other leading trading nations that have simply resumed previous policy patterns. The second stage in China’s rebalancing will consist of further strengthening private consumption. We argue that this will be best supported by continued reliance on renminbi stability and capital account management, so as to assure that macroeconomic policies can be framed in line with domestic development requirements.

Suggested Citation

  • Jorg Bibow, 2010. "How to Sustain the Chinese Economic Miracle? The Risk of Unraveling the Global Rebalancing," Economics Working Paper Archive wp_617, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_617
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    References listed on IDEAS

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    1. People’s Bank of China, 2008. "China: the evolution of foreign exchange controls and the consequences of capital flows," BIS Papers chapters, in: Bank for International Settlements (ed.), Financial globalisation and emerging market capital flows, volume 44, pages 143-151, Bank for International Settlements.
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    More about this item

    Keywords

    Global Imbalances; Rebalancing; Renminbi Revaluation; Stimulus Package; Export-led Growth;
    All these keywords.

    JEL classification:

    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F01 - International Economics - - General - - - Global Outlook
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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