Provocative lecture on China’s growth strategy and the precarious state of the world economy

In front of a full DIIS auditorium, Robert Boyer on January 18 gave a lecture on China's growth strategy and its implications for the world economy. The scenario presented by Boyer was alarming. The spectacular economic growth in China over the past 30 years has been based on high and increasing investment on one hand and declining consumption and rapidly increasing inequality on the other hand. This growth model, in Boyer’s analysis, is doomed to collapse, sooner or later. In other words, the Chinese need to fundamentally alter their growth strategy. At the international level, the Chinese and US economies are more interdependent than ever. At the same time, however, they have strongly conflicting interests with respect to Chinese exchange rate policy. Given the already precarious nature of the Chinese growth strategy, it is unlikely that China will make significant concessions to the US on the exchange rate issue. In the absence of such concessions, the pressure on the US growth model is likely to increase significantly, however. At the end of the day, it is only by understanding the domestic logic and dynamics of the Chinese growth strategy that we may appreciate how deep the problem of global imbalances goes – and how severe their implications are for the (not-too-promising) prospect of future financial stability.

Robert Boyer's presentation consisting of no less than 63 slides is now available online, together with discussant Yang Jiang's response.