The G7 economists and IMF's April report incorrectly prescribe that China's current account surplus is excessive and should be cut by boosting consumption. The world economy, particularly emerging markets and developing economies (EMDEs), benefits from China's high saving, which is exported as net capital outflows, increasing China's financial claims globally.
These outflows finance crucial investments abroad, including infrastructure and green energy projects, preventing a slowdown in global growth. EMDEs require unprecedented green capital formation for electrification and decarbonisation, and China's saving is vital for financing these needs, especially given liquidity challenges. China offers critical long-term financing and industrial capacity for green infrastructure. Policy implications suggest China redirect industrial policy support towards long-term green finance for EMDEs via market outflows, Belt and Road loans, FDI, and multilateral institutions like the New Development Bank and Asian Infrastructure Investment Bank. This strategy, despite potential geopolitical objections from Washington, is the most rational, growth-promoting, and climate-aligned use of China's high saving.
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