It will require many years of real determination by Beijing to drive the role of consumption to much higher levels if China is to rebalance in a nondisruptive way.
Michael Pettis is a nonresident senior fellow at the Carnegie Endowment for International Peace. An expert on China’s economy, Pettis is professor of finance at Peking University’s Guanghua School of Management, where he specializes in Chinese financial markets.
From 2002 to 2004, he also taught at Tsinghua University’s School of Economics and Management and, from 1992 to 2001, at Columbia University’s Graduate School of Business. He is a member of the Institute of Latin American Studies Advisory Board at Columbia University as well as the Dean’s Advisory Board at the School of Public and International Affairs.
Pettis worked on Wall Street in trading, capital markets, and corporate finance since 1987, when he joined the sovereign debt trading team at Manufacturers Hanover (now JPMorgan). Most recently, from 1996 to 2001, Pettis worked at Bear Stearns, where he was managing director principal heading the Latin American capital markets and the liability management groups. He has also worked as a partner in a merchant-banking boutique that specialized in securitizing Latin American assets and at Credit Suisse First Boston, where he headed the emerging markets trading team.
In addition to trading and capital markets, Pettis has been involved in sovereign advisory work, including for the Mexican government on the privatization of its banking system, the Republic of Macedonia on the restructuring of its international bank debt, and the South Korean Ministry of Finance on the restructuring of the country’s commercial bank debt.
He formerly served as a member of the Board of Directors of ABC-CA Fund Management Company, a Sino–French joint venture based in Shanghai. He is the author of several books, including The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy (Princeton University Press, 2013).
It will require many years of real determination by Beijing to drive the role of consumption to much higher levels if China is to rebalance in a nondisruptive way.
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Beijing’s unwillingness to boost the consumption share of GDP is not as bizarre as it seems.
In spite of China’s extraordinarily high investment levels, domestic savings nonetheless exceed domestic investment by quite a lot, making it a large net exporter of capital.
The decision Americans must make about industrial policy is whether policies that drive the nature and direction of the U.S. economy should be designed at home or abroad by its trade partners. In a hyperglobalized world, trade and industrial policies in one country are transmitted through trade imbalances into their obverse among that country’s trade partners.
Policymakers on either side of bitter trade dispute seem to confuse two issues.