China, global imbalances and
global restructurings
Andrew M. Fischer
Institute 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
850
800
750
current account (1 billion current USD)
700
650
600
550
500
US current account (-)
450
400
350
300
250
200
150
China reserves (-)
100
China current account
50
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
China BoP current value in USD (reserves -)
475
450
425
400
375
350
300
275
250
225
Current Acct
Capital Acc
Reserves (-)
Net E&Os
200
175
150
125
100
75
50
25
0
-25
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
Balance USD 1 billion
325
14%
13%
12%
Current Acct
Cap+Fin Acc
Reserves inverse (-)
Net Es&Os
11%
10%
9%
8%
7%
Very large devaluations (›40%)
6%
5%
4%
Large devaluation (›25%)
3%
2%
1%
0%
-1%
-2%
-3%
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
19
89
19
88
19
87
19
86
19
85
19
84
19
83
19
82
-4%
19
Balance/GDP (current value converted to USD at year-average market rates)
China BoP relative to GDP (current), 1982-2008
China Trade Balances with World Regions, 1997-2007
260
240
200
Total
180
N. America
160
Europe
140
Asia
120
Africa
100
L. America
80
Oc&Pac. Is.
60
40
20
0
-20
-40
-60
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
-80
19
97
balance USD billion
220
625
600
575
550
525
500
475
450
425
400
375
350
325
300
275
250
225
200
175
150
125
100
75
50
25
0
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
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
Oc&Pac M
19
97
USD billions
China Regional Trade Volumes 1997-2007
-75
udi A
rabi a
nes
ki sta
n
rkey
tnam
…K a
zakh
stan
…Tai
w an
…Vie
…UA
E
…Tu
75
…Ko
r ea R
ep .
…Th
ai lan
d
…Sa
a
an
l aysi
…Ph
i li ppi
…Pa
n
an
…Om
…Ma
…Jap
…Ir a
ia
ong
esh
…Ind
…Ho
ng K
…Ba
nglad
-50
t ot al
-25
Asi a
Balance USD 1 billion
China's Trade Balance with Asia
150
125
100
2005
2006
50
25
0
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
-10
-20
-30
-40
-50
-60
-70
-80
-90
-100
-110
Financial
Direct Investment
China FDI abroad
FDI in China
Securities/Portfolio
Other Investments
Reserves
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
Net Es&Os
19
90
Balance in USD billion
China financial account, composition 1990-2008
China financial account, composition / GDP, 1990-2008
5%
4%
Financial
3%
Direct Investment
China FDI abroad
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
balance/GDP (current value converted at year-average market rates)
6%
FDI in China
Securities/Portfolio
Other Investments
Reserves
Net Es&Os
China selected external accounts, 1990-2008
160
150
Trade services credit
140
Trade services debit
130
Income and profit credit
120
Income and profit debit
110
FDI in China balance
100
China FDI abroad balance
90
Portfolio Investment Assets
Portfolio Investment Liab.
70
Other Investment Assets
60
Other Investment Liab.
50
40
30
20
10
0
-10
-20
-30
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
-40
19
90
USD billion
80