Brasil e China no Reordenamento das Relações ... - Funag

china economic developments, prospects and lessons
China’s high rates of fixed capital investment in recent years serve a
double purpose. They provide demand for output, especially infrastructure
and housing. But they also represent additions to productive capacity,
which fuels long-term growth of both output and income. The high
investment and low consumption expenditure shares in very recent years
are also a direct reflection of the demand stimulus needed to counter the
effects of both the global recession and also China’s own self-inflicted
domestic slowing as a result of the 2007-08 program to fight inflation.
Analysis better supported by historical data shows that U.S. credit
expansion in the 2000s prior to the financial crisis spilled U.S.-dollardenominated
liquidity not only into the U.S. housing market but also into
the international market for manufactured products. This powerful rush
of excess demand, just as China was targeted for assembly of a wide
range of manufactured products previously finished in other countries,
is persuasively caused by this surge in demand rather than by exchange
rates or China’s low consumption rate and high savings rate. Indeed,
the equality between national savings and the current account balance
is only an accounting identity, not a causal relationship. In China’s case,
the current account surplus, with its rush of inflowing U.S. dollar cash,
caused high savings to mount in China’s corporate sector, not the other
way around 3 .
V. Challenges after the Crisis
China after the crisis of course faces a wide range of domestic
economic challenges. Most are continuing challenges from before the
crisis. These include worsening pollution and the need to settle continuing
waves of rural-to-urban migrants. They include social unrest triggered
in part by expectations rising even faster than the economy can satisfy
them and in part by local corruption that frustrate citizen’s social and
commercial initiatives. They include energy conservation and food safety,
as well as modernizing the education system and broadening coverage
of social safety nets. The list goes on.
But one challenge was created by China’s response to the crisis itself.
Because so much of China’s stimulus program was funded by bank loans
to infrastructure projects at the local level, the question remains whether
3 Ibid.
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