S9 Ep25: Rebalancing the Chinese economy

About this episode

The episode discusses the structural imbalances in the Chinese economy and their global implications.

In 2003, Premier Wen Jiabao warned that China's growth model was unbalanced between supply and demand, over-reliant on investment and exports. More than 20 years later, the imbalance is smaller — but China is vastly larger. What its economy produces and exports now moves global markets. The argument about China's external surplus is no longer just a spat between Beijing and Washington. Yiping Huang, Dean of the National School of Development at Peking University, has written a chapter in the fourth Paris Report, published jointly by CEPR and Bruegel, examining China's structural imbalances from the inside. His argument: the same policies that powered 45 years of growth also suppressed household income and consumption. Factor market distortions, especially artificially low interest rates, kept the cost of capital down and subsidised state-owned enterprises; decentralised GDP-target competition pushed local governments toward investment and industrial expansion rather than services and household support. The result was a powerful supply side with a persistently weak domestic demand side. When you produce more than you can sell at home and you are a small economy, you export the…

People in this episode

Guest: Yiping Huang

Topics covered

• Chinese economy
• structural imbalances
• global markets
• household income
• domestic demand
• investment
• exports

Keywords

• China
• economy
• supply and demand
• household consumption
• investment
• exports
• GDP
• property market

Mentioned in this episode

Organizations: National School of Development at Peking University, CEPR, Bruegel

Places: China, Beijing, Washington

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