Sustaining china s growth miracle a delicate balancing act
Download
1 / 57

Sustaining China ’ s Growth Miracle A Delicate Balancing Act - PowerPoint PPT Presentation


  • 66 Views
  • Uploaded on

Sustaining China ’ s Growth Miracle A Delicate Balancing Act. Eswar S. Prasad Cornell University, Brookings Institution and NBER. Outline of Talk. Characterizing China ’ s ascendance Getting behind the growth story Policy challenges: short term, long term The rebalancing challenge

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about ' Sustaining China ’ s Growth Miracle A Delicate Balancing Act' - blenda


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Sustaining china s growth miracle a delicate balancing act
Sustaining China’s Growth Miracle A Delicate Balancing Act

Eswar S. Prasad

Cornell University, Brookings Institution and NBER


Outline of talk
Outline of Talk

  • Characterizing China’s ascendance

  • Getting behind the growth story

  • Policy challenges: short term, long term

  • The rebalancing challenge

  • China-US relationship


Shares of world gdp in percent

30

30

Nominal

PPP

25

25

20

20

15

15

10

10

5

5

0

0

1996

2010

1996

2010

Shares of World GDP (in percent)


Contributions to world gdp growth in percent

70

40

Nominal

PPP

60

30

50

40

20

30

20

10

10

0

0

1996

2010

1996

2010

Contributions to World GDP Growth (in percent)


Income per capita usd thousand

50

50

Nominal

PPP

40

40

30

30

20

20

10

10

0

0

1996

2010

1996

2010

Income per Capita(USD thousand)


Domestic demand usd trillion

3.0

12

Investment

Consumption

2.5

10

2.0

8

1.5

6

1.0

4

0.5

2

0.0

0

1996

2010

1996

2010

Domestic Demand(USD trillion)


Trade and debt

Share of World Exports

Public Debt

10

16

(in percent)

(USD trillion)

14

8

12

10

6

8

4

6

4

2

2

0

0

1996

2010

1996

2010

Trade and Debt








Exports and imports 12 month growth rates
Exports and Imports Investment, and Nominal GDP(12-Month Growth Rates)


Exports and imports billions usd
Exports and Imports Investment, and Nominal GDP(Billions USD)


Trade and current account balances billions usd
Trade and Current Account Balances Investment, and Nominal GDP(Billions USD)


Trade and current account balances percent of gdp
Trade and Current Account Balances Investment, and Nominal GDP(Percent of GDP)


Macroeconomic policies
Macroeconomic Policies Investment, and Nominal GDP

  • Fiscal policy

  • Monetary policy

  • Exchange rate regime



Money and credit growth
Money and Credit Growth Investment, and Nominal GDP


Nominal exchange rates
Nominal Exchange Rates Investment, and Nominal GDP


Real effective exchange rate indices
Real Effective Exchange Rate Indices Investment, and Nominal GDP


Foreign exchange reserves flows and stocks billions usd
Foreign Exchange Reserves: Flows and Stocks Investment, and Nominal GDP(Billions USD)


Inflation rates year on year
Inflation Rates Investment, and Nominal GDP(Year on Year)


Chinese bond yields
Chinese Bond Yields Investment, and Nominal GDP


U s treasuries
U.S. Treasuries Investment, and Nominal GDP


Short term policy challenges
Short-Term Policy Challenges Investment, and Nominal GDP

  • Controlling inflation

  • Restraining credit growth

  • Asset bubbles: Real estate?

  • Managing capital inflows


Equity market indices
Equity Market Indices Investment, and Nominal GDP



Balance of payments billions usd
Balance of Payments Investment, and Nominal GDP(Billions USD)


Improving the balance of growth
Improving the Balance of Growth Investment, and Nominal GDP

  • From exports to domestic demand

  • Investment to consumption-led growth

  • Employment growth

  • Reducing regional disparities


Investment and private consumption percent of gdp1
Investment and Private Consumption Investment, and Nominal GDP(Percent of GDP)


Labor share of national income flow of funds data
Labor Share of National Income Investment, and Nominal GDPFlow of Funds Data


Labor share of national income gdp income approach
Labor Share of National Income Investment, and Nominal GDPGDP-Income Approach


Personal disposable income percent of gdp
Personal Disposable Income Investment, and Nominal GDP(Percent of GDP)


Composition of national saving percent of gdp
Composition of National Saving Investment, and Nominal GDP(Percent of GDP)



Why is urban household savings rate rising
Why is Urban Household Savings Rate Rising? Investment, and Nominal GDP

  • Chamon, Prasad (Jan. 2010), AEJ: Macroeconomics

  • Chamon, Liu, Prasad (Dec. 2010), NBER WP 16565

  • Precautionary motives: Buffer stock savings (young, middle-aged); Health risk (elderly)

  • Structural factors: Financial market underdevelopment; Pension reforms


Twelfth 5 year plan
Twelfth 5-Year Plan Investment, and Nominal GDP

  • Comprehensive assessment of growth challenges

  • Key short-term priority: managing inflation

  • Lower but higher-quality growth: less resource- intensive, employment-generating, equitable

  • Strong signals to common households, local govts.

  • Financial system reforms; Capital a/c convertibility

  • But all reforms in China’s way, at China’s pace


Tensions short term vs long term objectives
Tensions: Investment, and Nominal GDPShort-term vs. Long-term Objectives

  • Long-term goal: Raising wages

  • Short-term problem: Inflation

  • Long-term goal: Making RMB international currency

  • Short-term problem: Capital inflows


Reform priorities
Reform Priorities Investment, and Nominal GDP

  • Financial sector development

  • Better monetary policy framework

    • Fx flexibility a piece of the puzzle

  • Social safety nets

  • Governance reforms (corruption)


Growth prospects
Growth Prospects Investment, and Nominal GDP


China: Population Projections Investment, and Nominal GDP


Risks
Risks Investment, and Nominal GDP

  • Sudden stop/reversal of capital inflows

  • Plunge in value of US dollar

  • Collapse of external demand

  • Loss of confidence in banking system


Ratio of deposits to gdp
Ratio of deposits to GDP Investment, and Nominal GDP


International investment position billions usd
International Investment Position Investment, and Nominal GDP(Billions USD)


Risks1
Risks Investment, and Nominal GDP

  • Sudden stop/reversal of capital inflows

  • Plunge in value of US dollar

  • Collapse of external demand

  • Loss of confidence in banking system

  • Asset price busts

  • Social instability


Risks2
Risks Investment, and Nominal GDP

  • Sudden stop/reversal of capital inflows

  • Plunge in value of US dollar

  • Collapse of external demand

  • Loss of confidence in banking system

  • Asset price busts

  • Social instability

  • China-US relationship turns ugly


China u s relationship
China-U.S. Relationship Investment, and Nominal GDP

  • The exchange rate issue, bilateral trade

  • Restrictive government procurement policies (indigenous innovation policy)

  • Flashpoint: Chinese holdings of U.S. debt

  • Risks of the legislative process


Prospects
Prospects Investment, and Nominal GDP

  • Short-term growth prospects look good

  • Many challenges for long-term growth

  • Sustainable high growth needs policy reforms


ad