The Future of the Sino-American Co-Dependency

Luigi Bonatti () and Andrea Fracasso

No 1006, Department of Economics Working Papers from Department of Economics, University of Trento, Italia

Abstract: The crisis of 2008 has shown the unsustainability of the global imbalances centered on the USChina symbiotic relationship that characterized the previous decade. This has revived the so-called growth-rebalancing debate. In particular, the new emerging consensus calls for a re-orientation of the US economy away from consumption and toward exports, and for policy shifts that can help China to reduce its dependence on external demand and inefficiently high rates of capital accumulation. In this essay, we discuss the economic and political feasibility of the proposed patterns of re-adjustment by focusing on the short- and long-term trade-offs faced by the policymakers. We argue that the rebalancing will be gradual and partial because of the costs associated with a radical shift in the growth strategies of both countries. We also believe that this scenario will be consistent with a world economy expanding at lower rates than in the past decade.

Keywords: Growth strategies; Global imbalances; Sino-American co-dependency; Growth Rebalancing (search for similar items in EconPapers)
JEL-codes: E42 F33 F41 F43 O41 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-mac
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