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Rebalancing Growth in China: A Three‐Handed Approach
Author(s) -
Blanchard Olivier,
Giavazzi Francesco
Publication year - 2006
Publication title -
china and world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.815
H-Index - 28
eISSN - 1749-124X
pISSN - 1671-2234
DOI - 10.1111/j.1749-124x.2006.00027.x
Subject(s) - renminbi , currency , china , economics , ask price , chinese economy , action (physics) , focus (optics) , international economics , market economy , monetary economics , economy , exchange rate , political science , law , quantum mechanics , optics , physics
The present paper is an attempt to define the contours of the right macroeconomic strategy for China. In a nutshell, we believe that the package includes a decrease in saving, with a focus on private saving, an increase in the supply of services, in particular health services, and an appreciation of the RMB. This is why we refer to this strategy as a “three‐handed approach”: action on the fiscal and budgetary front, accompanied by currency revaluation. We start by asking how the Chinese economy got to where it is, what the strategy has been since the beginning of the reforms, and what the main characteristics of the economy are today. We then ask what is the desirable path for the future, and which are the main policy trade‐offs implied by such a path. Finally, we put the various pieces together to describe what we believe is a consistent policy package. (Edited by Xiaoming Feng)