Trudging ahead in imbalance

One year ago, the British magazine the Economist showed a cartoon of two persons riding a tandem, a Yankee in jeans at the front and a Chinese worker in working uniform in the rear. The implication of the picture: the US consumption and the Chinese production have become two major engines for the global economy. It is also one of the significant changes on the world economy in the recent years.

The Economist has estimated that the global economy experienced a high-speed growth in 2004 and 2005, the highest ever actually since 1970s. The overall situation is "bright". However, when we look at the "bright" scenario at the threshold of 2006, it has become history and the concern now is the prospect.

Any forecast on the global economy should be based on the outlook of US and Chinese economy. At least the following three answers must be answered before a relatively precise forecast can be made: whether American consumers will have their money burn hole on their pockets; whether Chinese producers keep turning out more at the same speed as they do now and; whether other economies will recover to inject fresh energy into the global economy.

More and more economists are giving increasingly frequent warnings against a turning point of the US economy. They think the rider at the front has long been seriously ill and will lose power at any time. The diagnosis is easily supported by the reality of the massive budget deficit and declining deposit rates. That is to say, Americans are lending and spending more than they are saving. However, the US economy has sustained its growth so far amid the imbalance. It is a peculiar phenomenon in the global economy.

Many experts believe that the absence of the turning point so far results from the Fed's low interest rates policy. But the interest rate hike, which seems unavoidable now, is putting on jitter now. Much has also been talked about two things. One is the rising oil price which has dampened the US consumers. The other is the falling housing price in some places in the US, an indicator of slumping consumer confidence there. A one-hundred percent precise projection for economy is never possible. But the truth is that dark clouds are gathering.

The rider at the rear, China, seems to show signs of slowdown. Western experts believe that China has contributed to one-third of the world economic momentum. China is still a developing country and faces severe challenges of economic restructuring domestically. Even in this condition, China has shouldered responsibilities which should have been taken on by more developed countries.

China's domestic demand has begun to show signs of expansion when the foreign trade continues rising. China has helped boost the Asian economy which is doing very well. But economists are concerned that, given the close interaction between the US and the Chinese economies, it will be hard for Chinese producers to keep their production lines operational in full capacity once the US economy encounters a turning point.

Here is the third question: a new driving force. The Japanese economy finally has begun to recover after more than ten years of depression. Although the German economy is still in stagnation, more and more German enterprises have improved their competitiveness through adjustment. A more solid step by the Japanese and German economies next year will be a boon for the world economy as a whole and is what economists have been expecting for years. However, currently we can only describe their economies as "fragile", "vulnerable" or "to be observed".

A lingering dilemma is behind the three questions: the structural imbalance. In recent years, the train of the global economy is running on a rail which is not so solid. Though its speed is not too slow, the risk is enormous. It can hardly survive when a thunderstorm attacks.

The structural imbalance must be solved to lay a more solid foundation for the global economy. That calls for persistent efforts by every country, especially the developed world with the US playing the leading role.

What we can do now is to deal with everything carefully and get prepared for the looming risk of economic slowdown, or even a thunderstorm.

By People's Daily Online