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Global Rebalancing and the Future of the Sino-US Codependency

  • Luigi Bonatti
  • Andrea Fracasso

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. Copyright (c) 2010 The Authors Journal compilation (c) 2010 Institute of World Economics and Politics, Chinese Academy of Social Sciences.

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Article provided by Institute of World Economics and Politics, Chinese Academy of Social Sciences in its journal China & World Economy.

Volume (Year): 18 (2010)
Issue (Month): s1 ()
Pages: 70-87

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Handle: RePEc:bla:chinae:v:18:y:2010:i:s1:p:70-87
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