2016年-PIIE彼得森国际经济研究所_A_Blueprint_for_Rebalancing_the_Chinese_Economy_16页_231kb

A Blueprint for Rebalancing the Chinese Economy

Core Content

This document outlines a comprehensive strategy for rebalancing China's economy, which has been characterized by an overreliance on investment and underdeveloped consumption and service sectors. The authors, Nicholas Lardy and Nicholas Borst, emphasize the need for structural reforms to address long-standing imbalances and ensure more sustainable economic growth.

Main Views

1. The Need for Rebalancing

• China's economic model has been described as "uncoordinated, unsteady, imbalanced, and unsustainable."
• The previous growth model was based on high investment and suppressed private consumption, leading to significant economic distortions.
• These distortions have built up asset bubbles and misallocated capital, increasing the risk of a sharp economic correction.
• The goal of rebalancing is to shift the economy toward a more sustainable model that relies more on consumption and services.

2. Policy Focus Areas

• Interest Rate Reform:
  • Interest rates have been artificially low for a decade to maintain an undervalued yuan.
  • Liberalizing interest rates would increase deposit rates, leading to higher consumption and lower investment.
  • Gradual liberalization is necessary to avoid destabilizing the corporate sector.
• Exchange Rate Reform:
  • A more market-based exchange rate would help reduce China's large current account surplus.
  • It would also shift the economic focus from manufacturing to services.
  • The renminbi is still somewhat undervalued, and further appreciation may be needed to align with productivity growth.
• Energy Price Reform:
  • Energy prices, particularly for electricity and liquid fuels, are heavily controlled, acting as an implicit subsidy to the industrial sector.
  • Removing these subsidies would encourage a more labor-intensive growth model and increase the wage share of GDP.
  • Current price-setting mechanisms for crude oil and coal are not fully reflective of market conditions, leading to inefficiencies.

3. Social Transfers and Income Redistribution

• A robust social safety net is essential to reduce precautionary saving and increase private consumption.
• Current social spending in China is low (5.7% of GDP), far below the levels of other emerging markets.
• Increasing social transfers and improving income distribution through progressive taxation and hukou reforms will help reduce inequality and boost consumption.

Key Information

• Investment as a Share of GDP:
  • Investment has been over 40% of GDP since 2003, peaking at 48% in 2011.
  • This high level of investment is unsustainable and must decline for long-term growth.
• Private Consumption:
  • Private consumption is currently low and must be increased to support growth.
  • The service sector has stagnated, growing by less than two percentage points between 2002 and 2011.
• Income Inequality:
  • The Gini coefficient in China has remained high, with the top 5% holding 62% of total savings.
  • The CHFS survey suggests that inequality may be even higher than official statistics indicate.
• Exchange Rate Impact:
  • A more flexible exchange rate would reduce the need for foreign exchange intervention.
  • The renminbi's appreciation has already contributed to a decline in the current account surplus.
• Financial Repression:
  • The central bank's low interest rates have imposed an implicit tax on banks and households.
  • This has led to negative real deposit rates and suppressed private consumption.

Conclusion

Economic rebalancing in China requires a multi-faceted approach, including liberalizing interest rates, allowing a more flexible exchange rate, and reforming energy prices. These reforms, coupled with increased social transfers and better income distribution, will help shift the economy from a capital-intensive model to a more balanced one that supports sustainable growth and reduces inequality. While the process is complex and will require careful implementation, it is achievable and necessary for China's long-term economic health.