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Rebalancing is beginning, but it won't be easy

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There has been a lot of misguided chatter over the last five years about how China's economy has been rebalancing towards a more healthy and sustainable growth trajectory.

Now, however, it may finally be beginning to happen.

Seen from the outside, it looks like China's economy has been rebalancing ever since 2007.

That's because foreigners tend to be worried their markets are being swamped by Chinese exports, while China isn't buying anything they manufacture. As a result, when they want to see how unbalanced China's economy is, they look at indicators like its current account surplus.

The current account is the broadest measure of China's trade balance. In rough terms, it tells you how much more China produces than it consumes, with the extra production equalling the surplus.

Viewed in these terms, China's economy reached its greatest imbalance in 2007, when the current account surplus hit an all-time high of 10 per cent of the country's gross domestic product (GDP).

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