THE BOTTOM LINE
Excess savings are driving the new ‘China shock’
While subsidies direct increasing exports towards favoured sectors, they do not cause the surge
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[BEIJING] The first China shock followed China’s entry to the world trading system.
This was when the mobilisation of its massive pool of low-cost labour, combined with heavy investment from abroad, caused global manufacturing capacity to shift decisively towards the country.
The new China shock is different. It is rooted in domestic technological upgrading and amplified by weak domestic demand.
