What if China Manufactures a Sugar High?

RePEc Short ID: pmi740
ORCID iD: 0000-0002-6260-2133

Akinci, Ozge; Clark, Hunter L.; Dawson, Jeffrey B.; Higgins, Matthew; Miranda-Agrippino, Silvia; Nallamotu, Ramya; Nourbash, Ethan

Discussion Paper

What if China Manufactures a Sugar High?

Abstract: While the slump in China’s property sector has been steep, Chinese policymakers have responded to the falloff in property activity with policies designed to spur activity in the manufacturing sector. The apparent hope is that a pivot toward production-intensive growth can help lift the Chinese economy out of its current doldrums, which include weak household demand, high levels of debt, and demographic and political headwinds to growth. In a series of posts, we consider the implications of two alternative Chinese policy scenarios for the risks to the U.S. outlook for real activity and inflation over the next two years. Here, we consider the impact of a scenario in which a credit-fueled boom in manufacturing activity produces higher-than-expected economic growth in China. A key finding is that such a boom would put meaningful upward pressure on U.S. inflation.

Keywords: globalization; trade; international; China;

JEL Classification: F0;