| ID | 075991 |
| Title Proper | External contradictions of the Chinese development model |
| Other Title Information | export-led growth and the dangers of global economic contraction |
| Language | ENG |
| Author | Palley, Thomas I |
| Publication | 2006. |
| Summary / Abstract (Note) | China's development model faces an external constraint that could cause an economic hard landing. China has become a global manufacturing powerhouse, and its size now renders its export-led growth strategy unsustainable. China relies on the US market, but the scale of its exports is contributing to the massive US trade deficit, creating financial fragility and undermining the US manufacturing sector. These developments could stall the US economy's expansion, in turn triggering a global recession that will embrace China. This is the external constraint. These considerations suggest that China should transition from export-led growth to domestic demand-led growth. This requires growing the economy's demand side as well as its supply-side. To avoid stalling the US economic expansion, which is critical to China's growth, China should significantly revalue its currency as part of a generalized East Asian upward currency revaluation. Longer term, China should raise wages and improve income distribution. Under export-led growth, higher wages undermine employment. Under domestic demand-led growth, they support it. The challenge is to raise wages in an efficient decentralized manner. History shows that this requires independent democratic trade unions. However, such unions are currently unacceptable to the Chinese political leadership. Creating a domestic demand-led growth regime therefore requires solving this political roadblock. |
| `In' analytical Note | Journal of Contemporary China Vol. 15, No.46; Feb 2006: p69-88 |
| Journal Source | Journal of Contemporary China Vol. 15, No.46; Feb 2006: p69-88 |
| Key Words | China -Economic Development ; Economic Contraction |