CHINA’S ECONOMIC REBALANCING: WHAT ARE THE IMPLICATIONS FOR ITS EXTERNAL SECTOR?

This paper examines the core aspects of China’s economic rebalancing process (from industry to services and innovations, from investment to consumption, and from exports to domestic demand), presents the main economic policy measures adopted to that end by China’s government, paying special attention to the impact of this process on the external sector of the Chinese economy, relevant for the rest of the world. We use China’s balance of payments and international investment position statistics to identify several major trends in China’s external sector in the context of economic rebalancing, among which the gradual abandoning by China of its role as assembler of goods after processing and shifting from “double surplus” (in the current account and in the financial account) to “current account surplus and net capital outflow”, in connection with China’s entering into the next phase of economic development.