For years, China has relied on huge domestic savings to fund the investment that has powered its rapid economic growth. While President Xi Jinping has backed a shift toward unleashing consumption as an alternative driver of growth, Beijing has repeatedly been tempted to lean back on investment when growth has weakened, as seen in its recent economic data.
But China's incipient swing from net saver to global net borrower will make it harder to rely on state-led investment. This shift to running current account deficits instead of surpluses, which is likely to occur this year, ought to give the government motivation to accelerate much-needed reforms to open the country's capital markets to foreign investors.
