OUTWARD DIRECT INVESTMENT AND CHINESE NEW NORMAL: A COMPARATIVE ANALYSIS WITH EUROPE

In Estudios, Sociedad by PSTBS12378sxedeOPCH

World trade and financial dynamics have definitely been altered in the 2008 global financial crisis aftermath. Heavily burdened developed countries, such as Greece or Spain, have experienced a sharp reduction in their external deficits after years of overspending and high indebtedness. A model based on mounting debts could not last forever so those countries were forced to embrace structural reforms during the crisis period which started in 2008-10.

 Wages, exchange rates and overall price levels have gone down significantly in South European countries such as Spain. This just mentioned adjustment has consequently reduced their protracted trade deficit while attracting foreign savings in the form of FDI. But whose savings? China did realize that surplus accumulation, and debt securities purchases, could not grow endlessly neither. China has already concluded through its latest 13th Five-Year Plan that a domestic consumption-oriented economy, to lift barriers in the tertiary industry and encourage outward direct investments are indispensable to rebalance the world economy.