Rebalancing the Chinese economy

Rebalancing the Chinese economy

Policy brief
02 November 2009

China's economy and society are undergoing an extraordinary transformation, with hundreds of millions of people escaping poverty in record time. But the country's development model is not sustainable economically or politically. Average living standards in China are still very low and it makes little sense for the country to be exporting so much of what it produces and then investing the surplus in developed economies. The Chinese authorities need to bring about a big shift from external to domestic demand, and from investment and export-driven growth towards an economy in which consumption and services play a bigger part. Crucially, they must allow China's currency to appreciate.

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