An End to China’s Imbalances?

23 Pages Posted: 3 May 2012

See all articles by Ashvin Ahuja

Ashvin Ahuja

International Monetary Fund (IMF)

Nigel Andrew Chalk

affiliation not provided to SSRN

Malhar Nabar

International Monetary Fund (IMF)

Papa N'Diaye

International Monetary Fund (IMF) - Asia and Pacific Department

Nathan Porter

affiliation not provided to SSRN

Date Written: April 2012

Abstract

Global imbalances have been a central theme of the international economic policy debate for much of the last decade, prompted by large and sustained current account deficits in the U.S. and counterpart surpluses in China, Germany, and among many of the oil producers. This paper focuses on the current state of the external imbalance in China, examining the factors underlying the post-2008 drop in China’s current account surplus and analyzing the prospects for the external surplus going forward. The paper finds that China’s current account surplus should remain modest in the coming years. However, despite the fact that China’s medium-term current account is likely to stay below its pre-crisis range, it is too early to conclude that "rebalancing" has been truly achieved in China. While imbalances do not currently seem to be manifesting themselves as a feature of China’s external accounts, the evidence increasingly points to a rising domestic imbalance as growth becomes increasingly dependent on very high levels of investment.

Keywords: Current account balances, Current account surpluses, Exchange rate appreciation, Terms of trade

Suggested Citation

Ahuja, Ashvin and Chalk, Nigel Andrew and Nabar, Malhar and N'Diaye, Papa and Porter, Nathan, An End to China’s Imbalances? (April 2012). IMF Working Paper No. 12/100. Available at SSRN: https://ssrn.com/abstract=2050261

Ashvin Ahuja

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Nigel Andrew Chalk

affiliation not provided to SSRN

No Address Available

Malhar Nabar

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Papa N'Diaye

International Monetary Fund (IMF) - Asia and Pacific Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Nathan Porter (Contact Author)

affiliation not provided to SSRN ( email )

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