I posted a link to the pdf of my powerpoint slides for my JMU talk on the menu bar. Here it is again: JMU China Issues Lessons from Japan v2
I made two main points. One is to present the challenge of enhancing farm incomes in a developing country. This leads to a political economy puzzle: why would an urban-based supposedly autocratic political system care about rural residents – Mao certainly didn’t!
The second is to think about some of the tensions that will arise as China’s “headline” GDP growth diminishes. Here I examine Japan’s experience, and posit that China too will see private investment fall faster than private savings, leading to pressure for the government to serve as a borrower of last resort, by running large budget deficits. Most discussions of rebalancing assume that it will be a shift from a high investment macroeconomic regime to a high consumption one. I’m not so sure things will work out that smoothly; won’t the rebalancing be from investment to government??