Towards a ‘new normal’ growth strategy: China in comparative perspective

Joerg Mayer

Journal of Chinese Economic and Business Studies, 2016, vol. 14, issue 2, 107-128

Abstract: China’s move towards a new normal has been motivated by domestic factors and accelerated by the decline in export opportunities to developed countries. This decline, combined with the knock-on effects of China’s growth adjustments, is disrupting the favourable external environment that made developing countries’ export-led development strategies viable. This paper concentrates on a rebalancing of developing countries’ growth strategies towards a greater weight of household consumption as a potential alternative and discusses three challenges -- market size, domestic purchasing power and balance-of-payments constraints. Concentrating on the latter, it analyses changes in sectoral compositions of consumer demand and patterns of international trade. Results point to the risk that a shift in growth strategy causes an import surge. The paper’s findings indicate the scope and speed of required product innovation that would prevent a rebalancing of growth strategies towards a greater role of consumption from running into balance-of-payments constraints.

Date: 2016
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DOI: 10.1080/14765284.2016.1183109

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