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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
Analyzing China's Growth Model and Economic Challenges
The Chinese economy has transitioned from an investment-driven growth model, marked by significant infrastructure development from the 1980s to the 2010s, to a phase where the risks of a real estate bubble have led the government to reduce construction investment. This shift poses a challenge to GDP growth, which relies heavily on investment, consumption, government spending, and net exports. With the recognition that investment and consumption contribute 95% of China's growth, the country faces a critical choice: increase consumption, which has proven difficult, or maintain high investment rates to sustain GDP growth. While net exports provide some additional demand, they are inadequate to propel the economy independently. Therefore, the need to balance investment and consumption remains vital for China to achieve its growth targets.
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