...against fictions and other tall tales

Tuesday, 29 March 2011

The Governor of the People's Bank of China discusses Chinese savings and the global trade imbalance

The Banque de France recently published an interesting article by the Governor of the People's Bank of China, Dr. Zhou Xiaochuan, in its Revue de la stabilité financière. The article discusses the causes of high Chinese savings, as well as provides some interesting insight on how to address the current global trade imbalances. It also presents an interesting view of US-China trade dynamics.

The point I found most interesting in the article was Dr Xiaochuan's refutation of the common claim which holds that the increase in US consumer credit was fueled by the high level of Chinese savings. According to the Governor, Chinese savings could not have caused US consumption to increase given that the high consumption in the US commenced in the mid-1990s whereas "the savings ratio of East Asian countries only surged after the Asian financial crisis and China’s savings ratios did not begin to increase until 2002" (p. 168). Dr. Xiaochuan's take on this matter is in line with the point I made here regarding the causes of the high household debt burden in the US.


  1. Good link. I originally thought you were a neo-keynesian; but after your March 29 posting, I opt and welcome your orthodoxy. The Italian and Canadian schools will trumpet your arrival, as will PIMCO. Krugman should read you. I will send him your link. He needs moral support these days.

  2. Ciao Tanti - Thanks for checking out the site. Tanti auguri!

  3. I agree with Tanti-you're an orthodox keynesian with cutting edge insights from circuitry and Institutionals. You synthesize very well-creative. Most Italos are neos, and the rare Canucks from out east, who in passing are excellent, are ultras. However some good people in SA and Aus, not to mention UK recent Obit. Gott and the US.

    Since you're all exchanging in latin flavors, let me add my own color... con mis augurios para el porvenir

  4. Primarily, I view economics through a post-Keynesian lens, but we're seeing some (encouraging) convergence lately with the mainstream on a few general themes, especially in the areas of monetary theory and policy. I mean, something is happening when you see The Economist ranking Hy Minsky third most influential economist of the crisis, with Keynes in second place.

    See here for a piece on Minsky at the Fed: http://www.economist.com/blogs/freeexchange/2010/01/the_fed_discovers_hyman_minsky

    For more on Minsky, I recommend Randall Wray's recent working papers 655, 659 and 661 at the Levy Institute. See here: http://levy.org/publications/?doctype=13

    I think there is lots of merit in extracting good scholarship and analysis from both the mainstream and post-Keynesian literature.

    I agree with you on the high quality commentary coming from SA, US, UK and (especially) Australia.