Part 5/6:
The US is now trying to reduce its role as the "consumer of last resort" and the "absorber of last resort" for global excess savings. This puts pressure on other surplus countries, such as China, Germany, and Japan, to either redirect their surpluses or face the consequences of a decline in their manufacturing sectors.
Potential Paths Forward for China
Professor Pettis outlines three potential paths for China:
Do nothing and accept that the Chinese economy will be distorted by policies not designed in China, leading to a continued decline in the manufacturing share of the economy.
Pursue selective industrial policies to support strategically important sectors, but resign to a gradual decline in the overall manufacturing sector.