Hearing on China’s New Leadership and Implications for the United States - February 7, 2013 Economic Rebalancing in China: For the past several years China’s top leadership has repeatedly described the country’s current economic model as “uncoordinated, unsteady, imbalanced, and unsustainable.” This language is in sharp contrast to what has been a decade of apparent success: [...]

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In 2012, Chinese commercial bank profits grew by 19 percent at the same time regulators increased the flexibility of deposit interest rates. The Peoples Bank of China should take this as an opportunity to continue to gradually liberalize interest rates. A double digit increase in bank profits in 2012 suggests interest rate liberalization should continue [...]

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Increasingly China’s new leadership has revitalized the topic of urbanization. Last November, the vice-premier, Li Keqiang, wrote an article calling urbanization a “huge engine” for future economic growth. More recently, the newly released income inequality plan has even described urbanization as a tool to reduce income inequality. This renewed emphasis on urbanization appears to have [...]

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Beijing released policy guidance for consolidating nine “key” industries on January 22, triggering concerns that China is redoubling efforts to boost state-owned enterprises and tighten their grip on the marketplace. The circular, Guiding Opinions on Pushing Forward Enterprise M&A and Reorganization in Key Industries (“Opinions”), was issued by a collection of Chinese bureaucracies under the [...]

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The State Council’s newly released income inequality reform plan set forth an ambitious sounding goal that by 2015 the minimum wage should be 40 percent of the average wage throughout most of the country. Like many parts of the plan, this is actually a recycled policy from the 12th Five Year Plan that was released [...]

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We first commented on China’s new income inequality plan back in November when there was still a bit of skepticism over whether it would be released at all (it has been in the works since 2004). The initial outline of the plan was released this week in a notice (CN) by the State Council. The [...]

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Hot off the press, here’s our new policy brief on economic rebalancing in China. The paper takes an updated look at the key policy reforms necessary to achieve economic rebalancing, sketches out a feasible rebalancing scenario over the next decade, and analyzes the domestic political challenges. As always, your public and private comments on this paper are [...]

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With the release of fourth quarter 2012 economic data, we can give an update on the economic rebalancing in China. For an explanation of these indicators and why they are important, refer back to our original post on the topic. 1. Urban Disposable Income Growing Faster than GDP Urban disposable income continued to grow moderately faster than [...]

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For the uninitiated, when looking at China from afar it is easy to assume that in a “socialist-market economy” the state would play a significant role in employment. Even for seasoned China watchers, it is easy to fall into the misconception that the painfully slow pace of economic reforms during the Wen Jiabao and Hu [...]

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Michael Pettis’ new volume, The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy, is an important new take on the ramifications of global imbalances, in particular for China and the United States. The book sketches the familiar outlines of Chinese domestic and external imbalances, a sky-high investment share of GDP, [...]

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