Nicholas R. Lardy - Sustaining Chinas Economic Growth: After the Global Financial Crisis

Sustaining

China's Economic Growth

After the Global Financial Crisis

Nicholas R. Lardy.

PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS

Washington, DC

January 2012

Nicholas R. Lardy , called everybody's guru on China by the National Journal , is the Anthony M. Solomon Senior Fellow at the Peterson Institute for International Economics. He joined the Institute in March 2003 from the Brookings Institution, where he was a senior fellow from 1995 until 2003. He served at the University of Washington, where he was the director of the Henry M. Jackson School of International Studies from 1991 to 1995. From 1997 through the spring of 2000, he was also the Frederick Frank Adjunct Professor of International Trade and Finance at the Yale University School of Management. He is author, coauthor, or editor of The Future of China's Exchange Rate Policy (2009), China's Rise: Challenges and Opportunities (2008), Debating China's Exchange Rate Policy (2008), and China: The Balance SheetWhat the World Needs to Know Now about the Emerging Superpower (2006). He is a member of the Council on Foreign Relations and a member of the editorial boards of the China Quarterly, China Review , and Journal of Contemporary China .

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Copyright 2012 by the Peter G. Peterson Institute for International Economics. All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by information storage or retrieval system, without permission from the Institute.

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Library of Congress Cataloging-in-Publication Data

Lardy, Nicholas R.

Sustaining China's economic growth after the global financial crisis / Nicholas R. Lardy.

p. cm.

Includes bibliographical references.

ISBN 978-0-88132-626-0

1. China--Economic policy--2000- 2. China--Economic conditions--2000- 3. Global Financial Crisis, 2008-2009. I. Title.

HC427.95.L37 2012

338.951--dc23

2011043034

The views expressed in this publication are those of the author. This publication is part of the overall program of the Institute, as endorsed by its Board of Directors, but does not necessarily reflect the views of individual members of the Board or the Advisory Committee.

PETER G. PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS

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(202) 328-9000 Fax: (202) 659-3225

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Acknowledgments

This volume could not have been completed without the support of many individuals. My greatest debt is to Patrick Douglass and Nicholas Borst, research analysts who made it possible for me to keep up with the large flow of primary source material on which the volume draws heavily. I am also indebted to participants in a study group that met to critique a draft of the manuscript in mid-year 2011. This group included Vivek Arora, C. Fred Bergsten, Anders slund, Nigel Chalk, William Cline, Robert Dohner, Steven Dunaway, Nicolas Ericsson, Morris Goldstein, Yukon Huang, Albert Keidel, Kenneth Lieberthal, David Loevinger, Daniel Rosen, Nicolas Vron, John Williamson, Christopher Winship, and Zhu Min. Dwight Perkins and an anonymous reviewer critiqued the final manuscript. Others who offered useful written comments at various stages include Joseph Gagnon, Robert Lawrence, and Paul Vandenberg. Jin Mei of the Monetary Policy Department of the People's Bank of China clarified the scope of some of the data reported in the bank's quarterly Monetary Policy Reports , one of the most important primary sources on the Chinese economy.

I also benefited from the opportunity to present the findings of the study to audiences at the Peterson Institute for International Economics, the Brookings Institution, Stanford University, the University of Toronto, the International Monetary Fund, at a conference in Beijing organized by the Asian Development Bank and the Chinese Ministry of Finance, and at two meetings of a Track II Economic Dialogue organized by the National Committee on US-China Relations and the Beijing University China Center for Economic Research. Comments and feedback from these sessions led to numerous refinements in the analysis in the book.

A special thanks to C. Fred Bergsten, the director of the Peterson Institute, who has consistently been a strong supporter of the Institute's work on China, including this study. The publications department at the Peterson Institute, led by Ed Tureen, transformed the manuscript into the final printed form in an expeditious manner. I particularly thank Susann Luetjen and Madona Devasahayam, who were responsible, respectively, for production and design coordination and managing the editing.