The United States and the PRC: Macroeconomic Imbalances and Economic Diplomacy

Philip Levy

Macroeconomics Working Papers from East Asian Bureau of Economic Research

Abstract: This paper explores the ways in which macroeconomic imbalances have driven policy discussions between the United States (US) and People’s Republic of China (PRC) in the last decade. The PRC’s current account surplus, its growing foreign exchange reserves, and its shifting policies on exchange rate adjustment have become a central preoccupation of US trade policy. The paper considers the evolving political economy of the US policy stance and of the PRC’s response; it assesses the opportunity costs of an approach that has sometimes focused on the exchange rate to the exclusion of other issues; and it explores the ramifications for economic governance in the short- and medium-run. The paper finds that there has been ample mutual misunderstanding between the US and the PRC in their economic arguments; that the momentous debates have the potential to severely impair the institutions of global economic governance; and that there is likely to be an important race between economic and demographic forces that will naturally redress the imbalances and the political imperatives for each country to stand tough and fight.

Keywords: The United States and the PRC; Macroeconomic Imbalances; Economic Diplomacy; bilateral relations (search for similar items in EconPapers)
JEL-codes: F42 F51 (search for similar items in EconPapers)
Date: 2011-12
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Related works:
Working Paper: The United States and the PRC: Macroeconomic Imbalances and Economic Diplomacy (2011)
Working Paper: The United States and the PRC: Macroeconomic Imbalances and Economic Diplomacy (2011)
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