2/9
This is likely to be a very different strategy from the poorer parts of the country, where much of the growth is expected to come from public-sector spending. One consequence is that the gap between the most developed provinces and the rest of China will expand, as debt...
This is likely to be a very different strategy from the poorer parts of the country, where much of the growth is expected to come from public-sector spending. One consequence is that the gap between the most developed provinces and the rest of China will expand, as debt...
3/9
in the former grows much less rapidly than in the latter, mainly because economic activity in the former is likely to be driven by much "higher quality" growth (i.e. consumption, exports and business investment).
in the former grows much less rapidly than in the latter, mainly because economic activity in the former is likely to be driven by much "higher quality" growth (i.e. consumption, exports and business investment).
4/9
This matters if a conflict eventually develops (as I expect) between richer and poorer regions over how the very steep adjustment costs will be allocated once China decides – or is forced – to rein in debt and shift towards more of a consumption-driven economy.
This matters if a conflict eventually develops (as I expect) between richer and poorer regions over how the very steep adjustment costs will be allocated once China decides – or is forced – to rein in debt and shift towards more of a consumption-driven economy.
5/9
What worries me about the growth strategy of provinces like Guangdong and Zhejiang is the very explicit export focus provincial authorities see as key to their continued growth, which means that they are further postponing the shift towards a consumption-driven economy.
What worries me about the growth strategy of provinces like Guangdong and Zhejiang is the very explicit export focus provincial authorities see as key to their continued growth, which means that they are further postponing the shift towards a consumption-driven economy.
6/9
The Zhejiang government, for example, proposes to "exhaust all measures to push for export growth and work with enterprises in expanding external markets and securing more orders.”
The Zhejiang government, for example, proposes to "exhaust all measures to push for export growth and work with enterprises in expanding external markets and securing more orders.”
7/9
In practice pushing for export growth ultimately means increasing direct and indirect subsidies to manufacturers, and in the past these subsidies have always been paid for by households. This is why domestic demand in China has remained so weak.
In practice pushing for export growth ultimately means increasing direct and indirect subsidies to manufacturers, and in the past these subsidies have always been paid for by households. This is why domestic demand in China has remained so weak.
8/9
It's absurd that the world's second largest economy still sees exports rather than domestic demand as its growth engine. And while the rich provinces depend on exports to drive growth, poor provinces continue to push for infrastructure spending.
It's absurd that the world's second largest economy still sees exports rather than domestic demand as its growth engine. And while the rich provinces depend on exports to drive growth, poor provinces continue to push for infrastructure spending.
9/9
Neither is sustainable. It is clear that for all the talk of boosting domestic consumption, Chinese policymakers still plug away at a strategy that, while once very successful, in the past decade has delivered only deeper imbalances and more debt.
Neither is sustainable. It is clear that for all the talk of boosting domestic consumption, Chinese policymakers still plug away at a strategy that, while once very successful, in the past decade has delivered only deeper imbalances and more debt.
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