Meanwhile, consumer spending still accounts for less than 40% of China's GDP, lower than 46% in 2000.
In the United States, by contrast, consumer spending accounts for about 70% of GDP. In most developed countries, including the UK, the proportion is between 60% and 70% of his.
Chinese authorities have used massive amounts of state aid to expand key industries deemed strategically important, including batteries, high-end electronics and electric vehicles.
As Janet Yellen has pointed out, a further surge in exports by Chinese companies in these industries threatens to wipe out many companies in the United States and elsewhere.
This concern is completely understandable. There are undoubtedly some major strategic and security issues at stake here.
But there are also other common economic problems. Basically, there is nothing wrong with the idea that China's industrial production is booming and that it sells a lot of goods around the world.
The problem is that they do not buy equivalent goods in return, creating a huge trade surplus. What needs to happen is a policy shift to increase imports, not self-denial ordinances to reduce China's exports.
Most economists would think China's huge trade surplus is strange. Although Chinese people, on average, have enjoyed significant improvements in their standard of living over the past 25 years, they remain relatively poor compared to people in Europe and the United States. One would think that Chinese policymakers would take steps to boost consumption. This would have the side effect of increasing China's imports and reducing its trade surplus.
Why don't Chinese authorities act like this? They believe that China's interests are best served by continuing to invest large amounts of GDP to ensure strong economic growth in the future. fair enough.
But in parallel, sustained current account surpluses lead to the accumulation of financial assets in the form of claims owed to the West. This is also a type of investment. Chinese officials presumably believe this will strengthen China's power and security, but are dismayed by the large amounts of money tied up with China's enemies.
Security issues aside, should the West take issue with China's surplus, or should we just sit back and enjoy it?
After all, the surge in Chinese exports has had a major impact on curbing inflation, thereby contributing to a higher standard of living for the average worker in the West. The price of typical Chinese exports is now more than 10% lower than a year ago.
