Carnegie Endowment for International Peace
Falling growth rates in China may signal a much-needed transfer of wealth from the state to the household sector, a vital aspect of economic rebalancing.
Forcing the renminbi to appreciate might shift the burden of unemployment from the United States to China, but it would also set a dangerous precedent for future trade and currency wars.
Turning to foreign sources of capital, like a bailout by the BRIC countries, would only aggravate Europe’s economic problems, hurt growth prospects, and make the ultimate resolution of the debt crisis more difficult than ever.
Although tempting in the short run, a sudden influx of foreign capital into the European Union would raise both unemployment and debt without addressing the root of Europe's economic woes.
One way to prevent a long and painful decline in the region's economy would be for Germany to leave the eurozone, allowing indebted nations to devalue their currencies.
The underlying causes of the current debt crisis in the United States and the crisis faced by Japan in the 1980s differ fundamentally, and so will their resolutions.
An alternative reserve currency would mean faster growth and less debt for the United States and would help correct ongoing imbalances in the world economy.
As China tries to rebalance its economy, a small but rising number of Chinese economists are beginning to predict sharply lower annual growth rates in the coming years.
As long as the Chinese government retains its capacity to raise debt, a sharp slowdown in economic growth remains unlikely, at least until 2013.
Distorted incentive structures in China are encouraging many Chinese corporations to borrow—and increase their unsustainable level of debt—even though investments are not generating sufficient economic value.