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Contrary to popular thinking, China owes its astonishing economic expansion not to far-sighted government policy but to hundreds of millions of entrepreneurial peasants. Yasheng Huang's research reveals not only how small-scale rural businesses created China's miracle but how that nation's recovery from the global recession and righting the massive East-West trade imbalance depend on this same under-acknowledged sector.
From Vox In the years preceding the Great Recession, there was a dramatic rise in household debt (e.g. Mian and Sufi 2009) and an unprecedented increase in import competition. This competition was triggered by the expansion of China and other low-wage countries in global markets, and had substantial labour market consequences (Autor et al. 2013, Autor et al. 2014, Pierce and Schott, 2016). There is a striking break and a dramatic acceleration of both trends at the turn of the century. We hypothesise that these two phenomena were intimately linked, and that the impact of import competition on labour markets affected household debt expansion from 2000 to 2007. More precisely, we argue that the displacement of domestic production by imports fuelled demand for credit in impacted areas. We examine this hypothesis using a large, nationally representative panel dataset of anonymous consumer credit records, the Federal Reserve Bank of New York’s … Read More » The post International trade and household debt: How import competition from China helped fuel the credit bubble of the 2000s – Jean-Noël Barrot, Erik Loualiche, Matthew Plosser, Julien Sauvagnat appeared first on MIT Sloan Experts.