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Global Rebalancing and the Future of the Sino—US Codependency

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  • Luigi Bonatti
  • Andrea Fracasso

Abstract

The crisis of 2008 has shown the unsustainability of the global imbalances centered on the US—China symbiotic relationship that characterized the previous decade. This has revived the so‐called growth—rebalancing debate. In particular, the new emerging consensus calls for a re‐orientation of the US economy away from consumption and toward exports, and for policy shifts that can help China to reduce its dependence on external demand and inefficiently high rates of capital accumulation. We discuss the economic and political feasibility of the proposed patterns of re‐adjustment by focusing on the short‐term and long‐term trade‐offs faced by the policy‐makers. We argue that the rebalancing will be gradual and partial because of the costs associated with a radical shift in the growth models adopted by both countries. We believe that this scenario will be consistent with a world economy expanding at lower rates than over the past decade.

Suggested Citation

  • Luigi Bonatti & Andrea Fracasso, 2010. "Global Rebalancing and the Future of the Sino—US Codependency," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 18(4), pages 70-87, July.
    • Handle: RePEc:bla:chinae:v:18:y:2010:i:4:p:70-87
    DOI: 10.1111/j.1749-124X.2010.01205.x
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    Cited by:

    1. Luigi Bonatti & Andrea Fracasso, 2016. "Modelling The Transition Towards The Renminbi'S Full Convertibility: Implications For China'S Growth," Bulletin of Economic Research, Wiley Blackwell, vol. 68(S1), pages 146-170, December.
    2. Bin, Peng, 2015. "Regional Disparity and Dynamic Development of China: a Multidimensional Index," MPRA Paper 61849, University Library of Munich, Germany.
    3. Luigi Bonatti & Andrea Fracasso, 2012. "The costs of rebalancing the China-US co-dependency," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 120(1), pages 59-106.
    4. Luigi Bonatti & Andrea Fracasso, 2011. "Chinese reserves accumulation and US monetary policy: Will China go on buying US financial assets?," Department of Economics Working Papers 1105, Department of Economics, University of Trento, Italia.
    5. Andrea Fracasso, 2015. "Economic Rebalancing and Growth: the Japanese experience and China’s prospects," DEM Discussion Papers 2015/07, Department of Economics and Management.
    6. Luigi Bonatti, 2016. "Anemic economic growth in advanced economies: structural factors and the impotence of expansionary macroeconomic policies," DEM Working Papers 2016/11, Department of Economics and Management.

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