China has grown rapidly over the past few decades, but the engine of its remarkable growth may be reaching its limit. Are the rapid GDP gains from its fixed investment and export model coming to an end? And what, if anything, will replace it, and with what consequences for the world economy?
These are the questions we posed to the World Economic Roundtable, a group of policy practitioners, academics, and investment professionals we have assembled to remap the changes to the global economy in the wake of the Great Recession. To set the stage for this discussion we asked four leading experts for their assessment of China’s growth model.
David Beim, a Professor at the Columbia Business School, argues in The Future of Chinese Growth that China’s current investment-driven growth model has run its course and that the economy may take a “substantial pause” in the years ahead as it attempts to transition from excessive levels of investment to higher private consumption.
Michael Pettis, a Professor of Finance at Peking University, explains why China’s Troubled Transition to a More Balanced Growth Model entails reversing the decades-long policy of transferring wealth and income from households to Chinese based producers, which will require raising wages and restructuring China’s financial system.
Peter Marber, global head of emerging markets debt for HSBC Asset Management, argues that many emerging economies are Caught Between a Greenback and Redback World, in which they must contend with an over-abundant dollar that threatens inflation and an undervalued yuan that undermines their competitiveness.
Jay Pelosky, Principal at J2Z Advisory, LLC, says that higher inflation may be the Doubled Edged Catalyst that brings China’s policy makers to revalue the yuan. This is a necessary step to rebalancing demand in the world economy and would be preferable to raising domestic interest rates.
— Sam Sherraden
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