Commentaries

Now raising intellectual capital

Imagine when China runs a trade deficit

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If current trends continue, China might swing to a trade deficit
in the not-too-distant future. Given that China has enjoyed more
than a decade of strong exports, this may sound a bit far-fetched.
But even if it happens, this would not necessarily be something for
the world to worry about.

Some economists have recently sounded alarm bells about the
possibility of a Chinese trade deficit. They argue that if the
Chinese current account surplus shrinks, it would leave Beijing
with less spare cash to buy U.S. Treasury bonds. Then who would
fund the U.S. budget deficit — and, by implication, U.S.
consumers?

Those worries are largely misplaced. First, it is unlikely
to happen any time soon. In order for China to have a trade
deficit next year, imports would have to outgrow — or shrink
less than — exports by at least 23 percentage points.

In August, exports fell 23.4 percent while imports fell 17
percent. So while the trade surplus is diminishing, a deficit is
not around the corner.

Japan takes a kinder approach to growth

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The victorious Democratic Party of Japan did not put economic growth at the heart of its electoral sales pitch. The party’s manifesto mentions “growth” only once. The word “support”, by contrast, appears 19 times.

Even so, there are reasons for optimism that the DPJ’s softer and more nurturing policies are just what the economy needs.
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