The Peterson Institute for International Economics is a private, nonprofit, nonpartisan
research institution devoted to the study of international economic policy. More › ›

Keep up to date with Peterson Institute publications, events, and interviews with a subscription to our email newsletter.

Search Publications and Events

Use filters to narrow your search.

| More

POLICY BRIEF 06-6

China: Toward a Consumption-Driven Growth Path

by Nicholas R. Lardy, Peterson Institute for International Economics

China’s decision to transition away from growth driven by investment and a growing global trade surplus toward one more dependent on domestic consumption is laudable. But to date China’s initiatives have been too modest to change its underlying growth dynamic. China’s external surplus continues to balloon and, short of a US recession, seems likely to expand further in 2007. Household consumption as a share of GDP continued to decline in the first half of 2006. Despite much lip service to increasing budget outlays on social services, little evidence of a fundamental shift in government spending has emerged. So Chinese households’ precautionary saving persists. There is little evidence of a more flexible exchange rate and increased independence of monetary policy that would allow higher domestic interest rates. These and other factors suggest that China’s transition toward more consumption-driven growth is likely to be substantially delayed.

View full document [pdf]

subscribe

Search Publications and Events