It is therefore beyond unfortunate that President Xi Jinping has decided not to attend the summit in New Delhi this weekend, sending Premier Li Qiang in his place, and highlighting in the process how few options other countries will have. if China tries to solve its economic challenges. resorting to demand from the rest of the world. Since Xi will not be there to address the issue, other world leaders should consider in his absence exactly how they would handle this scenario. As Brad Setser of the Council on Foreign Relations points out, China's economic weakness has little direct effect on other advanced economies, because China earns a lot for itself and buys very little from others. Only a small fraction of American production reflects the manufacturing of goods and their export to the world's other economic giant. Rather than causing a slowdown elsewhere, the question is what would happen if China tried to export its way to growth as it did in the 1990s and 2000s. China's current account surplus already represents 2 percent of its huge economy.
If Beijing tried to raise it, it would be problematic, but more especially if it did so through policies aimed at keeping the value of the renminbi exchange rate low. The benefit of such policies for China is questionable today. With its economy Jordan Mobile Number List now so large and its manufacturing trade surplus already so large, it is difficult to see how external demand can make a large enough contribution to offset the faltering housing market. However, focusing on exports fits with Xi's goal of developing China's strength in the high-tech industry and his distaste for a stimulus aimed at domestic consumption. Encouraging Chinese citizens to travel home, rather than abroad, is an example of how policies can divert demand from other nations. Even if the diversion of demand to China were not enough to generate strong domestic growth, it could still cause disruptions in the global economy. Most obviously, if China makes its products more competitive, they will shift production elsewhere. More subtly, a current account surplus must be offset by capital flows.
Recycling China's surplus helped ease financial conditions around the world before the 2007-2008 financial crisis, just as the export of German savings to countries like Greece was part of the build-up to the eurozone crisis. in 2011. in the global economy are not a phenomenon that anyone should be in a hurry to review. So what can the rest of the G20 do about it, apart from urging China to generate more demand of its own? There are few easy answers. One thing to keep in mind is that a growing Chinese surplus would have superficial attractions. The economic environment of the mid-s was popular: it allowed Western consumers to live beyond their means, even as it accelerated the decline of their manufacturing industries. Right now, a deflationary push from China would help address the rising cost of living. This would alleviate a source of pain for many Western politicians. However, there should now be more international consensus against China running a large surplus than there was 20 years ago. China's economy is much larger and richer than it was then.