Ch 6 Sustaining Economic Growth in China - Institute for
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6 Sustaining Economic Growth in China China’s economic growth is unsteady, unbalanced, uncoordinated, and unsustainable. —Wen Jiabao, March 2007 Premier Wen Jiabao’s statement at his press conference following the close of the annual meeting of China’s legislature in March 2007 was remark- able for two reasons. First, China’s growth record is the envy of the world, with expansion averaging 10 percent for three decades. Second, since the assessment came from the man who had been in charge of the economy for the previous five years, it was an unusual self-criticism. What think- ing underlies Premier Wen’s assessment, and what policies is he promot- ing to make China’s growth more sustainable? Premier Wen and the rest of China’s top political leadership seek to rebalance the sources of economic growth. In place of investment and export-led development, they have endorsed transitioning to a growth path that relies more on expanding domestic consumption. The Chinese Communist Party formally embraced this goal as early as December 2004 at the annual Central Economic Work Conference. 1 Since then, Premier Wen has reiterated the goal of making domestic consumption a much more important source of China’s economic growth. 2 China’s goal of rebalancing the sources of economic growth is laudable. It increases the likelihood of China’s sustaining its strong growth, creating jobs more rapidly, improving the distribution of income or at least slowing the pace of rising income inequality, and reducing China’s outsized in- creases in energy consumption and carbon emissions. It also would help reduce global economic imbalances and thus lessen the risks to the global economy and reduce the possibility that China would be subject to pro- tectionist pressure, especially in Europe and the United States. For these reasons, US Treasury Secretary Henry Paulson, Jr. has repeatedly urged Chinese leaders to rebalance the sources of growth, and Federal Reserve Peterson Institute for International Economics | www.petersoninstitute.org
