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rfmcdonaldSaleha Mohsin and Enda Curran describe for Bloomberg how the Chinese economy, now relatively mature, cannot be pushed away by aggressive trade policy.
“China has become a larger, more powerful and a more influential economy,” said Eswar Prasad, a former chief of the International Monetary Fund’s China division and now a professor at Cornell University in Ithaca, New York. “The notion of the U.S. being able to damage Chinese interests is not that viable a threat anymore.”
The Asian nation in 2010 surpassed Japan’s economy as No. 2 even as its expansion moderated and debt ballooned. GDP growth is seen slowing to a rate of 3 percent to 6.5 percent in 2021, at best less than half the pace in 2007, when its double-digit expansion was fueled by a mix of cheap, low-end manufacturing that was designed for export and massive borrowing by local governments to fund infrastructure spending.
China’s multi-year growth sprint came at a cost. Total debt surged 465 percent over the past decade, according to Bloomberg Intelligence. Corporate debt jumped to 165 percent of GDP from 105 percent. The IMF has flagged China’s increasing debt pile as a possible threat to the banking system and global growth.
How China manages the yuan will be among the most pressing economic issues facing the incoming Trump administration. A 1.9 percent devaluation last year along with changes to how the yuan is traded caused bonds and stocks to sell off around the world. Investors worried that China was weakening its currency to help exporters.
While those fears have since subsided, they haven’t gone away. Pressure remains on China’s capital borders to get money out as the yuan weakens. While the currency is down about 2 percent since the devaluation in August 2015, it has appreciated by more than 20 percent since the nation abolished the dollar peg in 2005.
Chinese companies and investors are rushing to buy overseas assets at a record pace, forcing authorities to enforce strict rules on getting currency out of the country. Meanwhile the government is spending its international reserves -- down more than $800 billion since mid-2014 -- to prop up the yuan. Capital flowed out of the nation to the tune of $970 billion in the 12 months through October.
“China has become a larger, more powerful and a more influential economy,” said Eswar Prasad, a former chief of the International Monetary Fund’s China division and now a professor at Cornell University in Ithaca, New York. “The notion of the U.S. being able to damage Chinese interests is not that viable a threat anymore.”
The Asian nation in 2010 surpassed Japan’s economy as No. 2 even as its expansion moderated and debt ballooned. GDP growth is seen slowing to a rate of 3 percent to 6.5 percent in 2021, at best less than half the pace in 2007, when its double-digit expansion was fueled by a mix of cheap, low-end manufacturing that was designed for export and massive borrowing by local governments to fund infrastructure spending.
China’s multi-year growth sprint came at a cost. Total debt surged 465 percent over the past decade, according to Bloomberg Intelligence. Corporate debt jumped to 165 percent of GDP from 105 percent. The IMF has flagged China’s increasing debt pile as a possible threat to the banking system and global growth.
How China manages the yuan will be among the most pressing economic issues facing the incoming Trump administration. A 1.9 percent devaluation last year along with changes to how the yuan is traded caused bonds and stocks to sell off around the world. Investors worried that China was weakening its currency to help exporters.
While those fears have since subsided, they haven’t gone away. Pressure remains on China’s capital borders to get money out as the yuan weakens. While the currency is down about 2 percent since the devaluation in August 2015, it has appreciated by more than 20 percent since the nation abolished the dollar peg in 2005.
Chinese companies and investors are rushing to buy overseas assets at a record pace, forcing authorities to enforce strict rules on getting currency out of the country. Meanwhile the government is spending its international reserves -- down more than $800 billion since mid-2014 -- to prop up the yuan. Capital flowed out of the nation to the tune of $970 billion in the 12 months through October.
