2/8
But, as the article suggests, that bounce-back is likely to be temporary because the recovery in consumption can only be temporary. The Chinese economy is still overly dependent on unsustainable investment in property and infrastructure to drive growth.
But, as the article suggests, that bounce-back is likely to be temporary because the recovery in consumption can only be temporary. The Chinese economy is still overly dependent on unsustainable investment in property and infrastructure to drive growth.
3/8
The adverse impact of COVID on ordinary Chinese households was substantial, and while there is a greater consensus around the urgent need to boost household income and restrain non-productive investment, as of yet there is no recognition of the politics of such an adjustment.
The adverse impact of COVID on ordinary Chinese households was substantial, and while there is a greater consensus around the urgent need to boost household income and restrain non-productive investment, as of yet there is no recognition of the politics of such an adjustment.
4/8
Where I disagree with this article – and this is a mistake a lot of analysts seem to make – is in the claim that much of the increase in consumer spending will go to local services, and so will have limited effect on foreign economies.
That's not how trade works.
Where I disagree with this article – and this is a mistake a lot of analysts seem to make – is in the claim that much of the increase in consumer spending will go to local services, and so will have limited effect on foreign economies.
That's not how trade works.
5/8
If Chinese consumers spend more, some of that will go to imports and some will go to locally-produced goods and services, and to the extent that it goes to the latter, it will increase spending by workers who produce the latter, who will in turn spend money on imports.
If Chinese consumers spend more, some of that will go to imports and some will go to locally-produced goods and services, and to the extent that it goes to the latter, it will increase spending by workers who produce the latter, who will in turn spend money on imports.
6/8
The point is that China's net exports are a function of the gap between Chinese savings and Chinese investment, and to the extent that an increase in consumption is powered by a reduction in savings, China's trade surplus will narrow.
The point is that China's net exports are a function of the gap between Chinese savings and Chinese investment, and to the extent that an increase in consumption is powered by a reduction in savings, China's trade surplus will narrow.
7/8
No matter how Chinese consumers spend their money, in other words, unless their spending causes a decline in investment (and it is hard to imagine how that would happen), it will show up either as higher imports or lower exports.
No matter how Chinese consumers spend their money, in other words, unless their spending causes a decline in investment (and it is hard to imagine how that would happen), it will show up either as higher imports or lower exports.
8/8
It is only if we see a much-weaker-than-expected surge in consumption this year, or if continued contraction in the property sector drives down overall investment (both are possibilities), that China will not contribute to global growth this year.
It is only if we see a much-weaker-than-expected surge in consumption this year, or if continued contraction in the property sector drives down overall investment (both are possibilities), that China will not contribute to global growth this year.
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