Foreign Policy Blogs

The Rebalancing Act, v.2

FPA sent me a link to an article opposing the theory that the trade imbalance between China and other major players can be resolved by a stronger Yuan. David D. Hale and Lyric Hughes Hale frame the problem as one larger than the imbalance between China's exports and the weakening US economy: "The greater and far more critical challenge is to properly complete China's integration into the global economy."

Instead, they suggest taxation reform, restructuring of corporate/banking sectors, gradually opening capital accounts, and helping along domestic consumer spending. This idea puts a positive spin on the trade deficit by focusing on additive measures, rather than those working to negate current economic circumstances. The point here that I find most compelling is their refusal to deny the pros that have resulted from China's trade surplus. . . US companies outsourcing production costs to China have been exceedingly profitable, and those dollars the People's Bank of China buys up is helping to soften the blow of an indebted US economy. And let us not forget that the televisions and clothes assembled and manufactured in China are much more attractive to the average consumer.

All this reminds us of the progress that has been made thus far, economically, and in state relations. Granted, there is still much work to be done, but leveraging current platforms for coordination such as the Strategic Economic Dialogue series is an encouraging way to approach resolution. A renewed sense of optimism goes a long way.