China’s model is no longer mercantilist: What implications?

The characteristics of a mercantilist economic model are well known: growth stems from exports and market share gains, which requires low production costs and a weak currency; this leads to a large industry, external surpluses and therefore to the accumulation of foreign exchange reserves. This was clearly China’s model from the 1990s to 2013 , b ut it is no longer its model today. What are the implications of China abandoning its mercantilist model? A declining weight of industry in the Chinese economy. As a result , China’s imports are declining and the country is no longer contributing to global growth; Investment in China is no longer aimed at exporting but at serving the domestic market; China is no longer “the world’s factory”; China, whose trade surplus has become small, is no longer a trade threat; China is no longer financing other countries’ deficits, in particular those of the United States; Growth is driven by services, which, despite technological improvement, poses the threat of a significant slowdown in growth. The dangers of this new model are visible in China: labour market polarisation and inequalities ; slower growth.