China's Economy in Transition: From External to Internal Rebalancing
Books, November 7, 2013
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- China's Economy in Transition: From External to Internal Rebalancing
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Bibliographic details
- Authors: Anoop Singh, Malhar S Nabar, Papa M N'Diaye
- Published: November 7, 2013
- Series: Books
- DOI: https://doi.org/10.5089/9781484303931.071
Overview and key findings
- China's current account surplus has declined to around one-quarter the peak reached before the global financial crisis.
- The decline in the external surplus has not been accompanied by a decisive shift toward consumption-based growth.
- Compression of the external surplus has been accomplished through increasing fixed investment, so that investment is now an even higher share of China's national economy.
- The increasing reliance on fixed investment as the main driver of growth raises questions about:
- the durability of the compression in the external surplus, and
- the sustainability of the current growth model that has lifted about 500 million people out of poverty over the last three decades.
- The volume examines various aspects of the rebalancing process underway in China and highlights policy lessons for achieving stable, sustainable, and inclusive growth.
Analytical themes covered
- Dynamics of the current account and external imbalance adjustment.
- Role of fixed investment versus consumption in growth composition.
- Implications of a rising capital-to-output ratio and investment share for medium-term macroeconomic stability.
- Relevance of real interest rates, interest rate liberalization, and saving rate dynamics for rebalancing.
- Labor market and income distribution considerations in an internal rebalancing process.
- Links between total factor productivity, production structure, and external trade patterns.
Policy implications and lessons (as emphasized by the volume)
- Rebalancing should aim to shift growth toward more consumption-driven and productivity-led sources rather than rely predominantly on higher fixed investment.
- Policies that support stable, sustainable, and inclusive growth are central to maintaining the gains from decades of poverty reduction.
- Attention to financial sector and interest rate policies (including interest rate liberalization) is important for reallocating resources efficiently.
- Labor supply, personal income, and redistribution mechanisms are relevant to broadening domestic demand and inclusion.