Transcript Are Global Imbalances Curable?

China’s Export-led Growth
Model: Time to Change?
Yang Yao
NSD & CCER
Peking University
China’s Economy in 2010: Forecast
and Views, NYSE,
Jan. 7, 2010
2015/7/18
1
What is wrong with the Chinese
growth model?
Source: China Statistical Yearbook, various years.
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The Conventional wisdom

Savings explanation:
◦ Chinese people save a lot, so
◦ Domestic consumption is low and China has to
export a lot.

Exchange rate explanation:
◦ China undervalues its currency so its products
are artificially competitive in the world market.
◦ But between 2005 and 2008, China’s export
volumes and CA surplus both increased
dramatically despite 20% revaluation of the RMB.
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China’s Economy in 2010: Forecast and
Views, NYSE, Jan. 7, 2010
3
Long-term factors
Industrial capacities
 Human capital
 Accession to WTO
 Demographic and structural
transformation

◦ A large labor force in the countryside: 40% of
the national total
◦ Demographic dividends: High working-todependent ratio
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Ratios of working population in the world
Source: Bloom, David etc. "Demographic change, social security systems, and savings,"
Journal of Monetary Economics, 2007, 54(1), pp. 92-114.
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Capital deepening
Expansion of trade
+
Low wage rates
High returns to capital
More investment
Share of capital
gains in GDP
increases
+
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Share of labor
income in GDP
decreases
China’s Economy in 2010: Forecast and
Views, NYSE, Jan. 7, 2010
6
High growth of labor productivity in manufacturing
Accumulative growth
Annual growth (%)
Accumulative growth (%)
Annual growth
Source: Lu and Liu, “The Growth of labor Productivity in Two Sectors and International
Comparison.: China Economic Quarterly, 2007,Vol. 6, No. 2: 357-380.
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1991－2006:
• Labor prod. in manufacturing increased
by a rate of 13.6％
 1978-2006:

◦ Manufacturing wage increased by a rate of
6.55%

Consequences
◦ Profit rates increased fast
◦ Share of labor income declined
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Profit rates have increased fast since 1998
20
利润总额/权益
总回报/权益
净利润/权益
净利润/固定资产净值
18
16
利润总额/资产
总回报/资产
净利润/资产
14
12
10
8
6
4
2
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
0
Source: CCER Research Team. “An Estimation of Capital Returns.” CCER Working Paper No. C2007002.
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Labor share in national income decreases
Source: China Statistical Yearbook, various years.
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Distribution of National Income:
1993－2007
0.8
0.7
0.6
Share
0.5
Residents
0.4
Enterprises
0.3
Government
0.2
0.1
0
Source: Chong-En Bai, and Zhenjie Qian. “Who Are Taking Away Residents’ Income?”
Social Sciences in China, 2009, No. 5.
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Shares of national savings in GDP
0.5
0.45
0.4
0.35
0.3
Enterprises
0.25
Government
0.2
Residents
0.15
0.1
0.05
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Source: China Statistical Yearbook, various years.
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Conclusions
China’s export-led growth model is
deeply rooted in the international division
of labor in which China is well prepared
to export labor-intensive manufacturing
goods.
 Taking trade as given, rebalancing should
be more focused on better use of China’s
savings.

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