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New Book
Sustaining China's Economic Growth after the Global Financial Crisis
Nicholas R. Lardy
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The global financial crisis and ensuing economic downturn has raised many questions concerning the future of global economic growth. Prior to the financial crisis, global growth was characterized by growing imbalances, reflected primarily in large trade surpluses in China, Japan, Germany, and the oil exporting countries and rapidly growing deficits, primarily in the United States. The global crisis raises the question of whether the previous growth model of low consumption, high saving countries such as China is obsolete. Although a strong and rapid policy response beginning in the early fall of 2008 made China the first globally significant economy to come off the bottom and begin to grow more rapidly, critics charged that China's recovery was based on the old growth model, relying primarily on burgeoning investment in the short run and the expectation of a revival of expanding net exports once global recovery gained traction. Critics also argued that, as government-financed investment inevitably tapered off, the likelihood was that global recovery would not be sufficiently strong for China's exports to resume their former role as a major contributor to China's economic expansion. The prospect, in the eyes of these critics, is that China's growth will inevitably falter.
This study examines China's response to the global crisis, the prospects for altering its model of economic growth that dominated the first decade of this century, and the implications for the United States and the global economy of successful Chinese rebalancing. On the first it analyzes the strengths and weaknesses of China's stimulus program. On the second it analyzes the nature of origins of the imbalances in China's economy and the array of policy options that the government can use to transition to more consumption-driven growth. On the third successful rebalancing would mean that more rapid growth of consumption would offset the drag on growth from a shrinkage of China's external surplus. Successful rebalancing would mean China would no longer be a source of financing for any ongoing US external deficit. From a global perspective China would no longer be a source of the global economic imbalances that contributed to the recent global financial crisis and great recession.
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Preview and purchase book online
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Op-ed
Learning from Chinese Mercantilism
Arvind Subramanian
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For almost a decade, China has followed a mercantilist growth strategy, which has involved maintaining a deliberately cheap exchange rate to boost exports and growth. Crucial to this policy has been China's choice to keep the economy relatively closed to foreign financial flows. Had it not done so, foreign capital chasing the high returns in China would have put upward pressure on the Chinese exchange rate and undercut its ability to export.
India, on the other hand, is steadily if stealthily dismantling its capital controls, foregoing the ability to emulate the Chinese growth strategy. For reasons still unclear, the world, and hence Indian policymakers, are in thrall to the narrative of "imbalance" surrounding Chinese mercantilism. In this view, mercantilism has been a problem for China, creating distortions and reducing welfare, and a problem for the world.
Chinese mercantilism has not been costless, and these costs may well be rising. But this imbalance narrative has obscured the first-order and potentially paradigm-shifting lesson about Chinese mercantilism: It promoted unprecedented growth, raised consumption dramatically, reduced vulnerability to risk, and facilitated China's rise as an economic superpower. India should avoid egregious Chinese mercantilism. But there is no reason India should, by liberalizing capital flows, deprive itself of the tools to prevent currency overvaluation, lower growth, and greater susceptibility to macroeconomic crises. There is a middle path between repelling the capital inherent in Chinese mercantilism and recklessly embracing it as India has chosen.
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Peterson Perspectives Interviews
Why Taxing Companies to Discourage Outsourcing Won't Work
Gary Clyde Hufbauer says President Obama's proposal to tax firms that outsource jobs will backfire and compel companies to sell off their foreign operations.
Updated Misery Index: Good News for the White House?
Gary Clyde Hufbauer discusses how the Peterson Institute's augmented misery index of economic indicators shows an improvement in the national outlook.
Recent Blog Posts
C. Fred Bergsten in the News
Wall Street Journal
Peterson Institute's Bergsten to Step Down
by Sudeep Reddy
"...one of the world's most prominent think tanks focusing on international economic policy...."
Financial Times
Founder Steps Down as US Think-Tank Head
by Alan Beattie
"...has...become one of the most familiar figures on the international economics circuit ... [at] what has become one of the most influential economics think-tanks in the world."
"Over the past few years, the institute has been named as the world's first or second most influential think-tank on international economics...."
Washington Post
At Peterson Institute, a Founder Steps Down
by Howard Schneider
"...a fixture in U.S. economic policy circles since the Nixon administration...."
The Hill
Bergsten to Step Down from Peterson Institute
by Erik Wasson
"...a towering figure in Washington economic policy circles...."
"...possibly the foremost Washington think tank on trade policy."
"Bergsten...is especially known for his expertise on international currency issues...."
PIIE Noted in the News and on the Web
White House Forum
Professor J. Bradford Jensen Meets with President Obama
J. Bradford Jensen meets with President Obama and Vice President Biden during the "Insourcing American Jobs" forum at the White House. Jensen presented President Obama a copy of his new PIIE book, Global Trade in Services: Fear, Facts, and Offshoring.
Bloomberg
Clive Crook: Europe Can Beat this Crisis but Maybe Not the Next
Clive Crook draws upon the Peterson Institute's recent event debating the euro area crisis in his analysis.
Preview of Our Next Issue
Op-ed
Heated Open Discussions at the Gaidar Forum
Anders Åslund
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Gary Clyde Hufbauer
Woan Foong Wong
The augmented misery index for the second half of 2011 improved dramatically compared with the first half, largely reflecting the sharp decrease in "headline" consumer price index and the biggest increase in housing prices since the end of 2009. Listen to related interview. |
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The Euro Crisis
C. Fred Bergsten, Simon Johnson, Jacob Funk Kirkegaard, and Peter Boone present differing analyses of the euro crisis.
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