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Risks behind the Opportunities

In: China After the Subprime Crisis

Author

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  • Chi Lo

Abstract

China’s economic expansion and structural change opportunities in the post-subprime years are certainly not going to be smooth. One imminent risk is a continuing (or even worsening) disequilibrium between aggregate saving and investment on a global scale in the post-subprime world. Arguably, the problem at the root of China’s persistent under-consumption problem is the Chinese government’s development policy of making China the world’s pre-eminent producer nation. This policy is in fact a social policy aimed at maintaining the stability of the country. All other factors, including a broken social safety net and an ageing population needing to save for retirement, are aggravating factors, in my view. As long as this ‘social production’ policy orientation remains unchanged, it will hold back consumption and render any rebalancing effort towards consumption-driven growth ineffective. If China cannot rebalance, the other (consumption) side of the world cannot rebalance.

Suggested Citation

  • Chi Lo, 2010. "Risks behind the Opportunities," Palgrave Macmillan Books, in: China After the Subprime Crisis, chapter 9, pages 138-153, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-29896-5_10
    DOI: 10.1057/9780230298965_10
    as

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