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China Is Exporting Unemployment | Michael Pettis on Global Trade Imbalances, American Capital Controls, and the End of The Chinese Growth Miracle
Forward Guidance
China's Dilemma: Boosting Domestic Demand vs. Export Subsidies
China faces a critical decision between stimulating domestic consumption and maintaining its competitive export manufacturing sector. The current weak domestic demand is linked to the country's export-driven model. Proposals to enhance consumption often fall short, failing to account for budget constraints, leading to minimal overall impact despite occasional small subsidies. Recent trends show slower consumption growth compared to GDP, indicating ineffective strategies. Analysts suggest that China may resort to significant fiscal borrowing aimed at transferring funds to households, potentially boosting short-term consumption. However, this approach raises concerns about sustainability and long-term solutions, as businesses acknowledge that the root of the issue lies in weak domestic demand.
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