Quite simply, if China can get its consumption up and stop needing to export so much capital a lot of other things will fall into place, Princeton University economist professor Paul Krugman said.
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Major saving counties like China and oil-exporting countries can change the current scenario by turning $1 trillion of savings into demand and a full global employment picture, Krugman said.
“If we don't see China finding a way to transition to from this very effective short-term stimulus to a long-term higher level consumption, then we have a lot more reason to think that we might be looking at a lost decade of the world as a whole,” he said.
China is becoming a major part of the world economy, adopting the rules of international institutions and is a player in the G20, and now has a question of what to do with its reserves, Laura Tyson, economist and presidential advisor, said.
And any ideas of policies that could try to contain China won’t help the global situation, Tyson said.
“If you look at the numbers by 2020 any reasonable estimate has real (gross domestic product) and purchasing power parity (with the U.S.),” she said. “So the question is what kind of new institutions, what kind of new cooperation forms, what kind of new bargains do you strike?”
Teh Kok Peng, president of GIC Special Investments, made the case for “boring leadership.”