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Rebalancing Growth in Asia

Authors


  • *I am grateful to Montek Ahluwalia, Akiko Hagiwara and Shikha Jha for helpful discussions and comments. I also thank two anonymous referees and the editor, whose comments helped sharpen the analysis and exposition in the paper. Grace Gu provided excellent research assistance and Lei (Sandy) Ye provided useful editorial comments.

Eswar S. Prasad
Dyson School of Applied Economics and Management, Cornell University, Ithaca, NY 14853, USA
eswar.prasad@cornell.edu

Abstract

While many Asian emerging markets now run current account surpluses, reducing Asia's overall excess savings is largely about modifying growth patterns and saving–investment balances in China. China accounts for about half of the total GDP in Asia ex-Japan but over two-thirds of the region's total savings and current account surplus. One feature shared by all Asian economies is the surge in corporate savings over the past decade. Household saving rates, by contrast, have increased in China and India but declined sharply in Korea. Contrary to the popular characterization of China as relying on export-led growth, GDP growth in China has been dominated by investment growth. A comparative analysis reveals that China's growth model has resulted in its having the lowest share of private consumption to GDP in the region and the lowest rate of employment growth relative to GDP growth.

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