One-Pager No. 44 | December 2013
Policy Options for China
Reorienting Fiscal Policy to Reduce Financial Fragility
Since adopting a policy of gradually opening its economy more than three decades ago, China has enjoyed rapid economic growth and rising living standards for much of its population. While some argue that China might fall into the middle-income “trap,” they are underestimating the country’s ability to continue to grow at a rapid pace. It is likely that China’s growth will eventually slow, but the nation will continue on its path to join the developed high-income group—so long as the central government recognizes and uses the policy space available to it.
China Financial fragility Fiscal policy Managed exchange rates Middle-income trap Modern Money Theory (MMT) Policy space Sovereign currency regimes