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The Future of the Sino-American Co-Dependency

Author

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  • Luigi Bonatti
  • Andrea Fracasso

Abstract

The crisis of 2008 has shown the unsustainability of the global imbalances centered on the USChina 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. In this essay, we discuss the economic and political feasibility of the proposed patterns of re-adjustment by focusing on the short- and long-term trade-offs faced by the policymakers. We argue that the rebalancing will be gradual and partial because of the costs associated with a radical shift in the growth strategies of both countries. We also believe that this scenario will be consistent with a world economy expanding at lower rates than in the past decade.

Suggested Citation

  • Luigi Bonatti & Andrea Fracasso, 2010. "The Future of the Sino-American Co-Dependency," Department of Economics Working Papers 1006, Department of Economics, University of Trento, Italia.
    • Handle: RePEc:trn:utwpde:1006
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    More about this item

    Keywords

    Growth strategies; Global imbalances; Sino-American co-dependency; Growth Rebalancing;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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