the “new normal” of the chinese economy from the standpoint of investments

Abstract

Investments and exports represented the main growth engines of the Chinese economy for more than three decades. China’s rise has been, and continues to be, one of the most noticeable transformations in the global economy. Nevertheless, as large internal imbalances have emerged and economies worldwide are unlikely to come back to growth rates similar to those prior to the financial and economic crisis, the need for the Chinese growth model to move towards a new stage is obvious. The current phase is dubbed by the Chinese authorities the “New Normal”. In this new stage, growth is supported mainly by domestic consumption. In spite of this major change, investments and trade will continue to be important drivers of China’s growth, going in parallel with the evolution of the standard of living and the increasing role of domestic consumption, as investment, trade and consumption are rather complementary. This paper aims to highlight: (1) the transition of the Chinese economy from a model based on export and investment towards a more balanced growth model supported by domestic consumption; (2) the drawbacks but also the advantages of the former development model based on investments, with a focus on recent developments in the real estate sector; (3) the importance of investments in infrastructure and the revival of the “Silk Road”. Hence, our research is structured around three sections, preceded by a short introduction and followed by some conclusions.