Global and Euro Imbalances: China and Germany

Abstract

We analyse global and euro area imbalances by focusing on China and Germany as large surplus and creditor countries. In the 2000s, domestic reforms in both countries expanded the effective labour force, restrained wages, shifted income towards profits and increased corporate saving. As a result, both economies' current account surpluses widened before the global financial crisis, and that of Germany has proven more persistent as domestic investment has remained subdued.

Keywords: Global imbalances, current account, capital account, saving and investment, international assets and liabilities, distribution of income, world banker

JEL Classification: F15, F32