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The rebalancing of China’s economy

Waldschmidt, Michael LU (2014) EKHR81 20141
Department of Economic History
Abstract
The last decades China was highly relaying on export led growth, which drove the economy to enormous GDP growth rates. Due to the financial crisis in 2007/2008, its trade partners were loosing the ability to import as much as before and China’s GDP growth started to decline. The reason for that is the neglect of the domestic consumption rate of private households. This paper examines the correlation between a higher reliance on household consumption and economic growth. Furthermore, it is analysing quantitatively how the rebalancing can be achieved. The two different models were testing the important changes of the wage level, the education system and the financial system and it’s correlation with the household consumption rate.

The... (More)
The last decades China was highly relaying on export led growth, which drove the economy to enormous GDP growth rates. Due to the financial crisis in 2007/2008, its trade partners were loosing the ability to import as much as before and China’s GDP growth started to decline. The reason for that is the neglect of the domestic consumption rate of private households. This paper examines the correlation between a higher reliance on household consumption and economic growth. Furthermore, it is analysing quantitatively how the rebalancing can be achieved. The two different models were testing the important changes of the wage level, the education system and the financial system and it’s correlation with the household consumption rate.

The results show that it is highly recommended to rebalance the economy to a higher reliance on the household consumption rate. The regressions show that a further focus on exports would lead to a decline of GDP growth. With a change to a focus on capital intense production, a better education system will develop, which will eventually lead to higher wages and with it the increase in the household consumption rate.

Keywords: (Less)
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author
Waldschmidt, Michael LU
supervisor
organization
course
EKHR81 20141
year
type
H1 - Master's Degree (One Year)
subject
keywords
Rebalancing China’s economy, household consumption, export led growth strategy, quantitative research, GDP growth rate
language
English
id
4590063
date added to LUP
2014-09-26 15:14:06
date last changed
2014-09-26 15:14:06
@misc{4590063,
  abstract     = {The last decades China was highly relaying on export led growth, which drove the economy to enormous GDP growth rates. Due to the financial crisis in 2007/2008, its trade partners were loosing the ability to import as much as before and China’s GDP growth started to decline. The reason for that is the neglect of the domestic consumption rate of private households. This paper examines the correlation between a higher reliance on household consumption and economic growth. Furthermore, it is analysing quantitatively how the rebalancing can be achieved. The two different models were testing the important changes of the wage level, the education system and the financial system and it’s correlation with the household consumption rate.

The results show that it is highly recommended to rebalance the economy to a higher reliance on the household consumption rate. The regressions show that a further focus on exports would lead to a decline of GDP growth. With a change to a focus on capital intense production, a better education system will develop, which will eventually lead to higher wages and with it the increase in the household consumption rate. 

Keywords:},
  author       = {Waldschmidt, Michael},
  keyword      = {Rebalancing China’s economy,household consumption,export led growth strategy,quantitative research,GDP growth rate},
  language     = {eng},
  note         = {Student Paper},
  title        = {The rebalancing of China’s economy},
  year         = {2014},
}