Rebalancing Growth in China: A Three-Handed Approach

40 Pages Posted: 22 Mar 2006

See all articles by Francesco Giavazzi

Francesco Giavazzi

University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Olivier J. Blanchard

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

Multiple version iconThere are 2 versions of this paper

Date Written: January 2006

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, economic development, international economics

JEL Classification: E2, O53

Suggested Citation

Giavazzi, Francesco and Blanchard, Olivier J., Rebalancing Growth in China: A Three-Handed Approach (January 2006). CEPR Discussion Paper No. 5403. Available at SSRN: https://ssrn.com/abstract=892870

Francesco Giavazzi (Contact Author)

University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER) ( email )

Via Roentgen 1
Milan, 20136
Italy
+39 02 5836 3304 (Phone)
+39 02 5836 3302 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Olivier J. Blanchard

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

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