## Rebalancing in China—Progress and Prospects

_IMF Working Papers, September 6, 2016_

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## Bibliographic details
- Authors: Longmei Zhang
- Published: September 6, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475532937.001

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### Overview
- China is transitioning to a greener, more inclusive, more consumer and service based, and less credit-driven economy.
- This paper defines a framework for assessing rebalancing, reviews progress, and discusses medium-term prospects.
- Publication date: September 6, 2016.
- Pages: 22. Volume: 2016. Issue: 183. Series: Working Paper No. 2016/183.
- DOI: https://doi.org/10.5089/9781475532937.001. ISBN: 9781475532937. ISSN: 1018-5941.

### Progress on Rebalancing
- External rebalancing:
  - Has advanced well.
- Internal rebalancing:
  - Progress has been mixed.
  - Supply side: substantial progress.
  - Demand side: moderate progress.
  - Credit side: limited progress.

### Income and Environment Outcomes
- Energy and carbon intensity:
  - The energy intensity of growth is falling.
- Labor and income:
  - Labor’s share of income is rising.
- Remaining challenges:
  - Income inequality remains very high.
  - Local air pollution remains very high.

### Medium-term Prospects and Key Projections
- National saving and investment:
  - The high national saving is expected to fall owing to demographic change and a stronger social safety net.
  - The investment ratio is expected to fall similarly, with increasing competition and profit normalization as growth slows.
- Sectoral composition:
  - The service sector will continue to gain importance, helping reduce the carbon intensity of output and increase labor’s share of national income and household consumption.
- Credit intensity:
  - Reducing the credit intensity of growth is likely to progress slowly unless decisive corporate restructuring and SOE reforms are implemented.

### Policy Implications and Recommendations
- Strengthen social safety net to support a decline in national saving.
- Encourage competition and profit normalization to allow the investment ratio to fall in line with lower saving.
- Facilitate service sector expansion to reduce carbon intensity and boost labor’s income share and household consumption.
- Implement decisive corporate restructuring and state-owned enterprise (SOE) reforms to accelerate reduction in the credit intensity of growth.

### Subjects and Keywords
- Subjects: Consumption, Credit, Economic sectors, Income, Income distribution, Money, National accounts, Services sector.
- Keywords: China, Consumption, Credit, GDP, GDP ratio, Global, government saving, household savings, Income, income convergence, Income distribution, investment ratio, Rebalancing, saving rate, service sector productivity growth, service sector share, Services sector, WP.

*Source: IMF Working Paper "Rebalancing in China—Progress and Prospects", Longmei Zhang, September 6, 2016. DOI: https://doi.org/10.5089/9781475532937.001*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/rebalancing-in-china-progress-and-prospects-44225_