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Submitted by Anonymous on
Thank you, Mr. Kuijs, for summarizing your analysis of China's CA surplus. Maybe you are writing for a Beijing audience but I find your assessment here in subsance as well as tone overly optimistic about the prospects of rebalancing. i recognize you have been studying and writing on the matter for several years and therefore wanted to publicly and respectfully venture the following critical comments: First, China's imports consist largely of commodities and supplies that fuel exports rather than consumer goods manufactured abroad. It is still an investment-led export subsidizing model. Externally, the US recovery has already reversed the recesson-induced move to rebalancing in the bilateral account, which is the centerpiece of China's surplus and the global imbalances now distorting economies of Mexico, Brazil, etc. Internally, the evidence I have seen only supports the notion that, notwithstanding official doctrine advocating China's economic adjustment, the prevailing political support lies with advocates of status quo policies favoring export manufacturing. The recent effective stimulus is an interesting fact, but consumption of foreign exports is still effectively taxed very sustantially by the currency peg. In sum then, China's investment-led export subsidizing model meets a reanimated US market, enriching and politically bolstering the already favored industrial interests. That is my read of your analysis and it points to the likelihood of political solutions. I'm interested to hear if and where you and others would agree with, object to, or qualify my comments. I also think we should be preparing the US media and political class for an intelligent discussion of the global and US-China imbalances - a tall but worthy task! Thank you. Matthew Lieber, Ph.D. Visiting Professor, Beloit College lieberm@beloit.edu