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The Appropriate Policy Mix for China

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  • Willem THORBECKE

Abstract

This paper discusses the appropriate policy mix for China in the post crisis period. As is well known, China has achieved a remarkable economic growth rate over the last 30 years using an export-led growth strategy. To implement this strategy, the Chinese authorities have pegged their currency to the US dollar and accorded favorable treatments to large corporations and wealthy individuals at the expense of ordinary workers and small and medium sized enterprises. However, this strategy is no longer appropriate. To continue developing, China should adopt a more flexible currency regime, use the excess profits of SOEs to invest in health care, pensions and educations, and liberalize the financial system. In the medium term, this policy mix will help to reduce global imbalances and to spread the fruits of the Chinese miracle to hundreds of millions of poor rural citizens and struggling urban migrants.

Suggested Citation

  • Willem THORBECKE, 2010. "The Appropriate Policy Mix for China," Policy Discussion Papers 10002, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:polidp:10002
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    File URL: https://www.rieti.go.jp/jp/publications/pdp/10p028.pdf
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    References listed on IDEAS

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    1. Willem Thorbecke & Gordon Smith, 2010. "How Would an Appreciation of the Renminbi and Other East Asian Currencies Affect China's Exports?," Review of International Economics, Wiley Blackwell, vol. 18(1), pages 95-108, February.
    2. International Monetary Fund, 2010. "Peru: Staff Report for the 2010 Article IV Consultation," IMF Staff Country Reports 2010/098, International Monetary Fund.
    3. Yuqing Xing, 2010. "Consumption, Income Distribution, and State Ownership in the People’s Republic of China," GRIPS Discussion Papers 10-18, National Graduate Institute for Policy Studies.
    4. Hayakawa, Kazunobu & Kimura, Fukunari, 2009. "The effect of exchange rate volatility on international trade in East Asia," Journal of the Japanese and International Economies, Elsevier, vol. 23(4), pages 395-406, December.
    5. Barry Eichengreen & Peter Temin, 2010. "Fetters of gold and paper," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 26(3), pages 370-384, Autumn.
    6. Shujiro Urata & Toshiyuki Matsuura & Yuhong Wei, 2006. "International Intrafirm Transfer of Management Technology by Japanese Multinational Corporations," Discussion papers 06006, Research Institute of Economy, Trade and Industry (RIETI).
    7. Willem Thorbecke & Hanjiang Zhang, 2009. "The Effect Of Exchange Rate Changes On China'S Labour‐Intensive Manufacturing Exports," Pacific Economic Review, Wiley Blackwell, vol. 14(3), pages 398-409, August.
    8. International Monetary Fund, 2010. "Republic of Estonia: Staff Report for the 2009 Article IV Consultation," IMF Staff Country Reports 2010/004, International Monetary Fund.
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    Cited by:

    1. Catherine Figuière & Laëtitia Guilhot, 2011. "Évolution du rôle du yuan en Asie orientale : la guerre des monnaies aura-t-elle lieu ?," Post-Print halshs-00697581, HAL.
    2. Mirjana Gligorić, 2011. "Exchange Rate Policy, Growth, And Foreign Trade In China," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 56(190), pages 103-139, July – Se.

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