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China, global imbalances and global restructurings
Andrew M. FischerInstitute of Social Studies
Krugman (2009). ‘The Chinese Disconnect.’
NYT, 22 October. ‘China’s bad behavior is posing a growing threat to the rest of the world economy. The only question
now is what the world — and, in particular, the United States — will do about it… Many economists, myself included, believe that China’s asset-buying spree helped inflate the housing bubble, setting the
stage for the global financial crisis. But China’s insistence on keeping the yuan/dollar rate fixed,
even when the dollar declines, may be doing even more harm now… with the world economy still in a precarious state, beggar-thy-neighbor policies by
major players can’t be tolerated. Something must be done about China’s currency.’
US deficit (reversed) and China surpluses
0
50
100
150
200
250
300
350
400
450
500
550
600
650
700
750
800
850
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
curr
ent
acco
un
t (1
bill
ion
cu
rren
t U
SD
)
US current account (-)
China current accountChina reserves (-)
-25
0
25
50
75
100
125
150
175
200
225
250
275
300
325
350
375
400
425
450
47519
8219
8319
8419
8519
8619
8719
8819
8919
9019
9119
9219
9319
9419
9519
9619
9719
9819
9920
0020
0120
0220
0320
0420
0520
0620
0720
08
Bal
ance
US
D 1
bill
ion
Current Acct
Capital Acc
Reserves (-)
Net E&Os
China BoP current value in USD (reserves -)
China BoP relative to GDP (current), 1982-2008
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Ba
lan
ce
/GD
P (
cu
rre
nt
va
lue
co
nv
ert
ed
to
US
D a
t y
ea
r-a
ve
rag
e m
ark
et
rate
s)
Current Acct
Cap+Fin Acc
Reserves inverse (-)
Net Es&OsVery large devaluations (›40%)
Large devaluation (›25%)
China Trade Balances with World Regions, 1997-2007
-80
-60
-40
-20
0
20
40
60
80
100
120
140
160
180
200
220
240
26019
97
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
bal
ance
US
D b
illio
n
Total
N. America
Europe
Asia
Africa
L. America
Oc&Pac. Is.
China Regional Trade Volumes 1997-2007
025
5075
100125
150175
200225
250275
300325
350375
400425
450475
500525
550575
600625
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
US
D b
illio
ns
Asia X
Asia M
N. Am X
N Am M
Europe X
Europe M
L. Am X
L Am M
Africa X
Africa M
Oc&Pac X
Oc&Pac M
China's Trade Balance with Asia
-75
-50
-25
0
25
50
75
100
125
150
Asi
a to
tal
…B
ang
lad
esh
…H
ong
Ko
ng
…In
dia
…Ir
an
…Ja
pan
…M
alay
sia
…O
man
…P
akis
tan
…P
hilip
pine
s…
Sau
di A
rabi
a…
Kor
ea R
ep.
…T
hai
lan
d
…T
urk
ey
…U
AE
…V
ietn
am
…T
aiw
an…
Kaz
akh
stan
Ba
lan
ce
US
D 1
bill
ion
2005
2006
China financial account, composition 1990-2008
-110-100-90-80-70-60-50-40-30-20-10
0102030405060708090
100110120130140150
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Ba
lan
ce
in U
SD
bill
ion
Financial
Direct Investment
China FDI abroad
FDI in China
Securities/Portfolio
Other Investments
Reserves
Net Es&Os
China financial account, composition / GDP, 1990-2008
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%19
9019
9119
9219
9319
9419
9519
9619
9719
9819
9920
0020
0120
0220
0320
0420
0520
0620
0720
08
bal
ance
/GD
P (
curr
ent
valu
e co
nve
rted
at
year
-ave
rag
e m
arke
t ra
tes)
Financial
Direct Investment
China FDI abroad
FDI in China
Securities/Portfolio
Other Investments
Reserves
Net Es&Os
China selected external accounts, 1990-2008
-40
-30
-20
-10
0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
160
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
US
D b
illio
n
Trade services credit
Trade services debit
Income and profit credit
Income and profit debit
FDI in China balance
China FDI abroad balance
Portfolio Investment Assets
Portfolio Investment Liab.
Other Investment Assets
Other Investment Liab.
