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Rebalancing Growth in China: A Three-Handed Approach

38 Pages Posted: 30 Nov 2005  

Olivier J. Blanchard

National Bureau of Economic Research (NBER); Peter G. Peterson Institute for International Economics

Francesco Giavazzi

Bocconi University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: November 25, 2005

Abstract

Our paper is an attempt to define the contours of the right macroeconomic strategy for China. In a nutshell, we believe that the package includes a decrease in saving, with a focus on private saving, an increase in the supply of services, in particular health services, and an appreciation of the RMB. This is why we refer to this strategy as a three-handed approach: action on the fiscal and budgetary front, accompanied by currency revaluation.

We start by asking how the Chinese economy got to where it is - what the strategy has been since the beginning of the reforms, and what the main characteristics of the economy are today. We then ask what is the desirable path for the future, and which are the main policy tradeoffs implied by such a path. Finally, we put the various pieces together to describe what we believe is a consistent policy package.

Keywords: China, growth, appreciation, services

JEL Classification: E2, O53

Suggested Citation

Blanchard, Olivier J. and Giavazzi, Francesco, Rebalancing Growth in China: A Three-Handed Approach (November 25, 2005). MIT Department of Economics Working Paper No. 05-32. Available at SSRN: https://ssrn.com/abstract=862524 or http://dx.doi.org/10.2139/ssrn.862524

Olivier J. Blanchard (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Francesco Giavazzi

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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