Market Depth
Michael Pettis: The Chinese Growth Miracle Is Over
Jun 7, 2022
Michael Pettis, finance professor at Peking University’s School of Management, discusses the Chinese growth model and factors that will impact its future. Topics include debt, demographics, deleveraging, and China's strategy for the next decade. Challenges in repairing imbalances and managing economic rebalancing are explored, with predictions of slow growth and stagnation similar to Japan.
32:50
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Quick takeaways
- The Chinese business model focuses on increasing domestic savings by redistributing income, leading to rapid growth but also high debt and non-productive investment.
- China needs to shift income from local governments to households to drive consumption and sustain economic growth amidst a changing demographic landscape.
Deep dives
The Chinese business model: High savings and high investment
The Chinese business model, known as the Gershin-Kron model, is based on high savings and high investment. Developing economies with low domestic savings rely on foreign savings to meet their investment needs. However, the Chinese model focuses on increasing domestic savings by redistributing income from ordinary people to the rich, businesses, or the government. This model has been successful in driving rapid growth in countries like Japan, the Soviet Union, and China, but it has also led to a surge in debt and non-productive investment.
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