China’s Attempt to Export Its Way Out of Glut Threatens World Economy

China came to the aid of the stricken global economy in 2008 with record stimulus funds. But that stimulus injection encouraged debt and overcapacity in key markets like steel and aluminum, explains Börje Ljunggren, author and former Swedish ambassador to China. The country’s total debt has more than doubled, now exceeding 250 percent of GDP. China accounts for half of global output in steel and is the world’s largest steel exporter. Overcapacity threatens industry, jobs and even China’s leadership. China’s central government has long realized that the current industrial model and trade imbalances with the West are unsustainable, but local officials are keen on creating jobs. To reduce overcapacity and control debt, China must sharply cut its labor force and also provide relief to trade partners in the West. – YaleGlobal

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