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07 August 2009


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Michael Wallace Butterfinger

Well, if GDP in aggregate is declining more quickly than say, a component like private consumption, then I guess it would have to increase as a share of GDP by definition. This is not startling, but does not mean that, given the overall differentials, that the savings rate can increase at the same time as the consumption share can increase. The two items are measured according to different criteria, and the savings rate is not a product of expenditure-side GDP accounting, which is what is being implied above. This refutation is missing the point, despite all of the charts. Sure, China can reduce its external surplus by increasing investment, and investment as a share of GDP has been rising for a decade, to levels that are as unsustainable as rates of consumer expenditure in the US.

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John Ross

  • Is Senior Fellow at Chongyang Institute for Financial Studies, Renmin University of China

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