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China: Toward a Consumption-Driven Growth Path

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  • Nicholas R. Lardy

    () (Peterson Institute for International Economics)

Abstract

China's decision to transition away from growth driven by investment and a growing global trade surplus toward one more dependent on domestic consumption is laudable. But to date China's initiatives have been too modest to change its underlying growth dynamic. China's external surplus continues to balloon and, short of a US recession, seems likely to expand further in 2007. Household consumption as a share of GDP continued to decline in the first half of 2006. Despite much lip service to increasing budget outlays on social services, little evidence of a fundamental shift in government spending has emerged. So Chinese households' precautionary saving persists. There is little evidence of a more flexible exchange rate and increased independence of monetary policy that would allow higher domestic interest rates. These and other factors suggest that China's transition toward more consumption-driven growth is likely to be substantially delayed.

Suggested Citation

  • Nicholas R. Lardy, 2006. "China: Toward a Consumption-Driven Growth Path," Policy Briefs PB06-6, Peterson Institute for International Economics.
  • Handle: RePEc:iie:pbrief:pb06-6
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    References listed on IDEAS

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    1. Edwin M. Truman, 2005. "Postponing Global Adjustment: An Analysis of the Pending Adjustment of Global Imbalances," Working Paper Series WP05-6, Peterson Institute for International Economics.
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    Cited by:

    1. Tyers, Rod, 2015. "International effects of China's rise and transition: Neoclassical and Keynesian perspectives," Journal of Asian Economics, Elsevier, pages 1-19.
    2. repec:eme:ceftpp:v:9:y:2016:i:2:p:146-170 is not listed on IDEAS
    3. Eswar S. Prasad, 2011. "Rebalancing Growth in Asia," International Finance, Wiley Blackwell, vol. 14(1), pages 27-66, April.
    4. C. Randall Henning, 2007. "Congress, Treasury, and the Accountability of Exchange Rate Policy: How the 1988 Trade Act Should Be Reformed," Working Paper Series WP07-8, Peterson Institute for International Economics.
    5. Calista Cheung & Sylvie Morin, 2007. "The Impact of Emerging Asia on Commodity Prices," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(2), pages 181-224, July-Dece.
    6. Tyers, Rod, 2014. "Looking inward for transformative growth," China Economic Review, Elsevier, vol. 29(C), pages 166-184.
    7. Bonatti, Luigi & Fracasso, Andrea, 2013. "Regime switches in the Sino-American co-dependency: Growth and structural change in China," Structural Change and Economic Dynamics, Elsevier, vol. 25(C), pages 1-32.
    8. Shaghil Ahmed, 2009. "Are Chinese exports sensitive to changes in the exchange rate?," International Finance Discussion Papers 987, Board of Governors of the Federal Reserve System (U.S.).
    9. Jose-Miguel Albala-Bertrand, 2016. "Industrial Interdependence: China 1995-2010," Working Papers 802, Queen Mary University of London, School of Economics and Finance.
    10. repec:eee:jpolmo:v:39:y:2017:i:4:p:712-728 is not listed on IDEAS
    11. Prasad, Eswar S., 2009. "Is the Chinese growth miracle built to last?," China Economic Review, Elsevier, vol. 20(1), pages 103-123, March.
    12. Lu Ming & Zhao Chen & Yongqin Wang & Yan Zhang & Yuan Zhang & Changyuan Luo, 2013. "China’s Economic Development," Books, Edward Elgar Publishing, number 14502, April.
    13. Justin Yifu Lin & Yan Wang, 2012. "China'S Integration With The World: Development As A Process Of Learning And Industrial Upgrading," China Economic Policy Review (CEPR), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 1-33.
    14. Yujuico, Emmanuel & Gelb, Betsy D., 2010. "Better marketing to developing countries: Why and how," Business Horizons, Elsevier, vol. 53(5), pages 501-509, September.
    15. J.M. Albala-Bertrand, 2016. "Structural change in industrial output: China 1995-2010," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 9(2), pages 146-170, June.
    16. Wang Dewen, 2010. "Can Social Security Boost Domestic Consumption in the People’s Republic of China?," Working Papers id:2490, eSocialSciences.

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