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Looking Inward for Growth

Rodney Tyers

No 12-04, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: Export led growth has been very effective in transforming China’s economy and establishing a large high-saving middle class. Notwithstanding political opposition from trading partners, this growth strategy has also offered the rest of the world an improved terms of trade and cheaper finance. Yet it is believed by China’s government that this convenient strategy has run its course and the transition has begun to a model that “looks inward” for growth, to be driven by expanding consumption and home investment. This paper uses a numerical model of the Chinese economy with oligopoly behaviour to examine the available “inward” sources of transformative growth along with the policies needed to exploit them. Success will require the redistribution of the considerable rents now accruing to connections of key state owned enterprises, suggesting the potential for political resistance and the yet-avoidable possibility that China could fall into a “middle incometrap”.

Pages: 30 pages
Date: 2012
New Economics Papers: this item is included in nep-cmp, nep-fdg and nep-tra
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Citations: View citations in EconPapers (7)

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