A Prediction of an Economic Volte-Face in China

The American economist Martin Feldstein writes:

“It is possible that, before the end of the decade, China’s current-account surplus will mute [sic] into a deficit as the country starts importing more than it exports and spends its foreign-investment income on imports rather than on foreign securities.

“If that happens, China will no longer be a net buyer of U.S. and other foreign bonds, putting upward pressure on interest rates in those countries. Although this scenario might now seem implausible, it is actually quite likely to occur. After all, the policies that China will implement in the next few years target the country’s enormous saving rate….

“A lower surplus and a stronger renminbi imply that the day will come when China is no longer a net buyer of U.S. government bonds. The U.S. should start planning for that day now.”

Source: Journal de Negocios, Portugal, March 24 (translated by Eurotopics)

2 Responses to A Prediction of an Economic Volte-Face in China

  1. With say three trillion U.S. dollars burning a hole in China’s pocket de-valuing against the renminbi, no wonder that it is on a buying spree. The Chinese empire will conquer with its cheque book.

  2. Their days are numbered, says Martin Feldstein. And he is a Harvard Professor.
    Unlike and you and me.

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