Is Export Led Growth Passé?

Domestic demand led growth will be a more reliable strategy than export led growth.

Policies aimed at ensuring export led growth also include export subsidies and barriers to imports.

A growth slowdown is hardly shocking for an export led economy.

Most important, export led growth must give way to domestic economic drivers.

The lesson is clear export led growth is the way to go.

In an optimal world, the surpluses of countries pursuing export led growth would be willingly matched by the deficits of those pursuing debt led growth.

In emerging markets, slow growth in the advanced economies has shut down a traditional development path export led growth.

China s export led economic model has reached its limits, and the transition to domestic led growth is intensifying internal frictions.

Export led growth meant that China could produce without worrying about developing the domestic market.

Under these conditions, export led growth by major economies is a threat to the world economy.

That is why it should not hanker after any ersatz export led or state directed growth.

After all, export led growth policies can succeed only if other countries are willing to run deficits.

Reserve accumulation was also a by product of China s deliberate currency undervaluation to promote export led growth strategy.

Domestic demand led growth will be a more reliable strategy than export led growth. That means that countries with a large domestic market and a prosperous middle class will have an important advantage.

As a result, there are now major questions about the sustenance of China's long powerful export led growth model.

First, China will begin to wean itself from the manufacturing model that has underpinned export and investment led growth.

Indeed, strong Chinese demand has supported its trading partners export led growth for much of the past three decades.

How bad would that be? After all, many Asian countries have achieved impressive export led growth under the current system.

But the viability of Deng s model is nearing its end, and China is now addicted to inefficient state led fixed investment and unsustainable export led growth, rather than domestic consumption, to generate jobs and growth.

And an unwillingness to trade away export led growth is having the same effect on the East s surplus countries (especially China).

But it does work Germany s export led growth is based on just such programs in the emerging countries and the US.

But exchange rates do affect the pattern of growth, and it is in China s own interest to restructure and move away from high dependence on export led growth.

Provided that South South trade linkages are reinforced, one might see a new round of successful export led growth in smaller countries.

Nevertheless, developing countries have been falling over each other to establish export zones and subsidize assembly operations of multinational enterprises. The lesson is clear export led growth is the way to go.

In particular, slowing global economic demand poses daunting challenges for many Asian economies, especially those that are more dependent on export led growth.

Equally interesting, China is attempting to move away from the export led growth strategy that it and other East Asian countries have pursued.

Three regions have collectively accounted for 83 of America s export led growth impetus over the past three years Asia, Latin America, and Europe.

Some of the increase in net transfers reflected strong growth in export revenues that had led to current account surpluses in some countries.

The formal sessions played out predictably, placing great emphasis on the coming structural transformation of China s growth model a colossal shift from the all powerful export and investment led growth of the past 32 years to a more consumer led dynamic.

There were no surprises in the basic thrust of the strategy a structural shift in China s investment and export led growth model toward a more balanced consumer based and services led economy.

A growth slowdown is hardly shocking for an export led economy. But China is in much better shape than the rest of the world.

China buys Treasuries because they suit its currency policy and the export led growth that it has relied on over the past 33 years.

Indeed, China faces tremendous challenges in maintaining macroeconomic stability under conditions of export led growth, with huge repercussions for the rest of the world.

Export led growth did not take place rapidly after devaluation, because of either the narrow base of exports or adverse conditions in global markets.

As China s economy grows relative to the economies of its trading partners, the efficacy of its export led growth model must inevitably fade. As a corollary, the returns on massive infrastructure investment, much of which is directed toward supporting export growth, must also fade.

He even has his own development strategy, dubbed Thaksinomics, a self styled approach that blends neo liberal export led growth with grassroots based domestic demand.

Some within the Chinese Communist Party leadership will support plans to engineer a shift from export led growth to a model based on domestic consumption.

The remainder of the Asian led US export impetus is spread out, led by South Korea, Japan, and Taiwan all export led economies themselves and all heavily dependent on a slowing China.

Growth in the region slowed sharply, as might be expected of export led economies confronted with the sharpest collapse in global trade since the 1930 s.

Finally, export growth slowed, not primarily because Indian goods suddenly became uncompetitive, but because growth in the country s traditional export markets decelerated.

Europeans, who were called on to improve productivity and raise domestic demand, reformed their economies at a glacial pace, while China maintained its export led growth strategy.

Africa, it was fashionable to say, would catch up only if it deregulated its economies and embraced export led growth like the miracle economies of East Asia.

To describe the symbiotic relationship between China s export led GDP growth and America s excessive consumption, the economic historians Niall Ferguson and Moritz Schularick coined the term Chimerica.

Reckless lending is undermining efficient allocation of capital and preventing China from drawing a line under the investment and export led growth model of the past three decades and basing future growth more on domestic consumption.