China should have a huge external surplus - Natixis

Patrick Artus, Research Analyst at Natixis, explains that China’s potential growth is markedly higher than that of the rest of the world (and its contribution to global potential growth is very significant) and since the supply of goods and services is larger in China than in the rest of the world, China should have an external surplus.

Key Quotes

“Moreover, China’s savings rate is markedly higher than that of the rest of the world, which should normally work in the same direction, i.e. give rise to a large external surplus for China.”

“Yet China’s external surplus has become small, which is linked to a third characteristic of China compared with the rest of the world: an abnormally high investment rate, especially in construction.”

“This abnormally high investment prevents China from having a significant savings surplus to lend to the rest of the world.”