Chinese overtrading

China’s greatest loss from the 2008-2010 crisis is the death of its 1986—2007 growth model. However, like a phoenix resurrected from its funeral ashes, what China metamorphoses into has the potential to be even better than its past. Section 10.1 of this chapter explains China’s 1986—2007 export-driven growth model and why the 2008—2010 crisis has killed it. Section 10.2 explains China’s short-term response to the crisis—an increase in fiscal stimulus—and produces preliminary quantitative estimates of its effectiveness. Section 10.3 explains China’s long-term response to the crisis—a switch to a domestic consumption-driven growth model—and why it could make China an even better economy. Section 10.4 concludes.