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How China Could Contribute to a Benign Global Rebalancing?

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  • Pingfan Hong
  • Rob Vos
  • Keping Yao

Abstract

Our study shows that China could contribute to an orderly global rebalancing using a package of policies to stimulate its domestic consumption. These policies include a progressive appreciation of the RMB, fiscal stimulation by increasing expenditure on education, health care, social safety nets and poverty reduction, income policies to reduce inequality and to strengthen wage income, and reforms of the financial system to improve financial efficiency and to mitigate financial constraints. By implementing such policies, China's external surplus could be narrowed and its domestic imbalances improved. The excessively high savings rate could be lowered and the share of household consumption increased, even though GDP growth would moderate slightly.

Suggested Citation

  • Pingfan Hong & Rob Vos & Keping Yao, 2008. "How China Could Contribute to a Benign Global Rebalancing?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 16(5), pages 35-50, September.
  • Handle: RePEc:bla:chinae:v:16:y:2008:i:5:p:35-50
    DOI: 10.1111/j.1749-124X.2008.00128.x
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    References listed on IDEAS

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    Cited by:

    1. Meixing Dai, 2011. "Motivations and strategies for a real revaluation of the Yuan," Working Papers of BETA 2011-23, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    2. Hong, Pingfan & Li, Hung-Yi, 2017. "Avoiding pitfalls in China’s transition of its growth model," Journal of Policy Modeling, Elsevier, vol. 39(4), pages 712-728.
    3. Eswar S. Prasad, 2011. "Rebalancing Growth in Asia," International Finance, Wiley Blackwell, vol. 14(1), pages 27-66, April.
    4. Qiangbing Chen, 2009. "Why China Should Invest Its Foreign Exchange Reserves in the Major US Banks," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(4), pages 1-17, July.

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