Global and Euro Imbalances: China and Germany

29 Pages Posted: 18 Jan 2016

See all articles by Guonan Ma

Guonan Ma


Robert N. McCauley

Bank for International Settlements (BIS)

Multiple version iconThere are 2 versions of this paper

Date Written: January-February 2014


We analyze global and euro area imbalances by focusing on China and Germany as large surplus and creditor countries. In the 2000s, domestic reforms expanded the effective labor force, restrained wages, shifted income toward profits and increased corporate saving. As a result, the Chinese and German current account surpluses widened, and that of Germany has proven more persistent, with subdued domestic investment. China is an early‐stage creditor, holding a short equity position and a long position in safe debt. Germany's balanced net debt and equity claims mark it as a mature creditor that provides insurance to the rest of the world. China pays to lay off equity risk, while Germany, by contrast, harvests a moderate yield on its net claims. In both economies, the shortfall of the net international investment position from cumulated current account surpluses arises from exchange rate changes, asymmetric valuation gains, and, in Germany's case, credit losses.

Keywords: current account, distribution of income, global imbalances, international investment, saving and investment

JEL Classification: E2, F15, F32

Suggested Citation

Ma, Guonan and McCauley, Robert N., Global and Euro Imbalances: China and Germany (January-February 2014). China & World Economy, Vol. 22, Issue 1, pp. 1-29, 2014. Available at SSRN: or

Guonan Ma (Contact Author)

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium

Robert N. McCauley

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics