CESEE and the Impact of China and Russia
Edited by Ewald Nowotny, Peter Mooslechner and Doris Ritzberger-Grünwald
Chapter 4: China, East Asia and global rebalancing
In 2010, policy makers around the world were confronted with a series of challenges that, while substantial, seemed relatively well defined. International organizations such as the IMF and the OECD highlighted the challenges of managing a two-speed recovery: emerging markets raced ahead, while the advanced economies plodded along. Global financial imbalances, particularly current account imbalances, were a worry, but there were some signs that both growth and rebalancing in the USA and China would prove durable. The prospects for sustained and global recovery seem much less definite at the time of writing. In the first half of 2011, most forecasters revised downward their estimates for growth in the USA and particularly in Europe, where recession is now more likely than not. Anxiety surrounding the durability of Chinese growth was rising toward the end of 2011. Against this backdrop, the resurgence in the US trade deficit combined with the reluctance of the Chinese to accelerate currency appreciation suggests that the challenges to sustaining both growth and rebalancing are much more profound than policy makers earlier thought. The failure in the USA to maintain (let alone increase) short-term fiscal and monetary stimulus – despite ample evidence of economic slack and little evidence of inflation or crowding out – and the difficulties euro area policy makers have encountered in forging a resolution to the debt crisis means that, if a global recovery with rebalancing is to be effected, it is incumbent upon policy makers in other countries to step into the breach. In my view, those measures include greater fiscal stimulus in the current account surplus countries and greater currency appreciation on the part of the East Asian economies. If one takes the European situation as one where policy makers have difficulty in doing anything more than muddling through the next few years, East Asia will be pivotal. In this respect, the fate of the world economy rests upon policy makers in China and East Asia to a greater extent than at any time in the past.
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.