The ‘Rebalancing’ Fallacy: 2008 and Its Aftermath

Abstract

This chapter interrogates the views of those optimists who expect China to ‘rebalance’ away from dependence on the export sector and towards serving increasingly wealthy domestic markets. Such rebalancing is unlikely, I argue, because such accounts mistake long-run trends in the data which demonstrate, on the contrary, that China’s economy remains profoundly imbricated with the global economy. Surpluses accumulated through export-led growth and captured by the state, alongside its distinctive form of control over the financial sector, have together allowed the Chinese government to insulate itself from global headwinds for a long period. As these surpluses have dwindled, state managers have turned to fictitious capital—debt—creation as a means of sustaining growth and social stability. As such, the exportist SOA outlined in the previous chapter underwent a critical transformation after 2008. But it is only through a return to the profitability of investments across its core export sectors can China hope to sustain its dynamic growth rates into the future. These ‘core sectors’—which generate the large surpluses upon which China relies to sustain its sky-high investment rate—as yet remain deeply embedded in global production networks in which Chinese firms remain by and large weak.