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An End to China’s Imbalances?

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Author Info

  • Ashvin Ahuja
  • Nigel Andrew Chalk
  • Nathan Porter
  • Papa N'Diaye
  • Malhar Nabar
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    Abstract

    Global imbalances have been a central theme of the international economic policy debate for much of the last decade, prompted by large and sustained current account deficits in the U.S. and counterpart surpluses in China, Germany, and among many of the oil producers. This paper focuses on the current state of the external imbalance in China, examining the factors underlying the post-2008 drop in China’s current account surplus and analyzing the prospects for the external surplus going forward. The paper finds that China’s current account surplus should remain modest in the coming years. However, despite the fact that China’s medium-term current account is likely to stay below its pre-crisis range, it is too early to conclude that "rebalancing" has been truly achieved in China. While imbalances do not currently seem to be manifesting themselves as a feature of China’s external accounts, the evidence increasingly points to a rising domestic imbalance as growth becomes increasingly dependent on very high levels of investment.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/100.

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    Length: 23
    Date of creation: 01 Apr 2012
    Date of revision:
    Handle: RePEc:imf:imfwpa:12/100

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    Related research

    Keywords: Current account balances; Exchange rate appreciation; Terms of trade; current account; current account surplus; current account balance; trading partners; current account deficit; domestic demand; export market share; export market; balance of payments; trade deficit; reserve bank; domestic economy; reserve portfolio; import side; net exports; reserve holdings; central bank; equilibrium model; export growth; current account surpluses; commodity prices; export prices; fixed investment; tradable goods; global market; trade structure; current account deficits; imported goods; domestic market; trade flows; factor markets; export share; domestic investment; global trade; partial equilibrium; world economy; reserve management; growing trade; domestic consumption; external position; import prices; share of world exports; global exports; trading partner; partner countries; trade model; imported inputs; export performance; export shares; world exports; oil prices; reserve accumulation; global markets; domestic production; global production; export sector; import markets; aggregate demand; trade performance; partner country; oil exporters; output growth; principal trading partners;

    This paper has been announced in the following NEP Reports:

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    1. Cheung, Yin-Wong & Chinn, Menzie D. & Qian, XingWang, 2012. "Are Chinese trade flows different?," Journal of International Money and Finance, Elsevier, vol. 31(8), pages 2127-2146.
    2. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The Revived Bretton Woods System: The Effects of Periphery Intervention and Reserve Management on Interest Rates & Exchange Rates in Center Countries," NBER Working Papers 10332, National Bureau of Economic Research, Inc.
    3. Michael Dooley & David Folkerts-Landau & Peter Garber, 2005. "An essay on the revived Bretton Woods system," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
    4. Douglas Laxton & Susanna Mursula & Michael Kumhof & Dirk Muir, 2010. "The Global Integrated Monetary and Fiscal Model (GIMF)," IMF Working Papers 10/34, International Monetary Fund.
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