TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Popular Reads
Top Results
No results found. Please check your search term and try again
Can't find what you're looking for?
View all search results
Popular Reads
Top Results
No results found. Please check your search term and try again
Can't find what you're looking for?
View all search resultsChina’s failed quest to rebalance its economy
When China’s leaders first acknowledged the need to rebalance the economy nearly two decades ago, it seemed like a matter of when, not if. But with the household consumption share of Chinese GDP remaining stubbornly low, officials’ promises to boost domestic demand have lost all credibility.
Change text size
Gift Premium Articles
to Anyone
Share the best of The Jakarta Post with friends, family, or colleagues. As a subscriber, you can gift 3 to 5 articles each month that anyone can read—no subscription needed!
A fruit and vegetable vendor updates the price of an item on August 9, 2023, at a market in Beijing. (AFP/Pedro Pardo)
C
hina’s efforts to rebalance its economy have been an abject failure. Nearly two decades after former premier Wen Jiabao bemoaned the Chinese economy’s excessive dependence on investment- and export-led growth, the problem has gone from bad to worse. The lack of meaningful consumer-led rebalancing implies increased reliance on these time-worn sources of economic activity, raising critical questions for China and the rest of the world.
As the first Western economist to stress China’s perspective on the need for such rebalancing, I am especially disappointed to write these words. I remember sitting in a Beijing meeting room in March 2007, watching Wen’s press conference following the conclusion of the National People’s Congress.
There was a small group of us in attendance, including some senior Chinese officials, when Wen uttered his now-famous critique of China’s economic structure: While seemingly strong on the surface, he cautioned, the economy was becoming increasingly “unstable, unbalanced, uncoordinated and unsustainable”.
There was an audible gasp from the Chinese officials present in the room, who translated the premier’s remarks and underscored their significance, presaging a vigorous debate in the country’s policy community.
I went back to my hotel room and wrote my first piece on China’s rebalancing imperative, which became the basis for my testimony before the United States Senate Finance Committee nearly two weeks later.
I stressed China’s newfound sense of urgency to shift its development model from investment and exports to consumer-led growth. I underscored the other structural changes this shift would entail: moving from manufacturing to services and from excess saving to saving absorption, which would lower the current account surplus and fund a larger social safety net.
I took Wen’s “four uns”, as I later dubbed them, as an important signal from the Chinese leadership of its readiness to do what was necessary to rebalance the economy. I was convinced that it was a matter of when, not if.
