"Lack of Balance, Coordination and Sustainability in Economic Development": China's growth and the 2007 financial crisis

Nigel Allington, John McCombie and Maureen Pike

Journal of Post Keynesian Economics, 2012, vol. 35, issue 1, 45-64

Abstract: One explanation for the U.S. subprime crisis was the export-led growth strategy of China that allowed the country to build up substantial trade surpluses. This led to a world glut of savings and was responsible for low world interest rates and the cheap credit in, especially, the United States. Although the Asian countries had little exposure to the subprime assets, they did not escape the downturn because their export markets in the advanced countries collapsed. The rebound was rapid, taking a V-shaped path. This paper examines these issues for China and discusses whether it precipitated the 2007 financial crisis through its trade surplus. The evidence suggests that these surpluses and global imbalances, generally, were the handmaiden of the crisis and not the cause.

Date: 2012
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DOI: 10.2753/PKE0160-3477350103

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