The bills differ in minor but meaningful ways, but their overwhelming convergence is key.
Alasdair Phillips-Robins, Scott Singer
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Without greater global investment or a rise in Chinese domestic consumption, the increasing U.S. savings rate will have serious repercussions for both the Chinese and American economies and create aftershocks in dozens of other countries.
In the wake of the global economic downturn, Americans are spending less and saving more, a trend that threatens dangerous economic repercussions around the world. Without greater global investment—which remains unlikely in today’s economic climate—or a rise in Chinese domestic consumption, the increasing U.S. savings rate will cause U.S. GDP to contract or Chinese GDP growth to drop sharply, creating aftershocks in dozens of major economies.
Trade policies will likely determine which country is least impacted, setting the stage for a showdown between China and the United States. Both countries would be wise to pursue a coordinated policy that controls the losses in the least disruptive way.
Key conclusions:
Recommendations for policy makers:
“While some in the United States may relish a difficult economic transition for China, no serious policy maker should consider such a prospect as anything other than harmful to long-term U.S. interests. For all the problems China will face, its role in resolving the main issues facing the world will only increase,” writes Pettis. “An economically difficult transition would undermine reformers in China who understand the country’s role in the global economy and would weaken its increasing tendency toward international cooperation. A mistrustful China, with pro-Western reformers undermined by nationalist hostility, is not good for the United States.”
Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
The bills differ in minor but meaningful ways, but their overwhelming convergence is key.
Alasdair Phillips-Robins, Scott Singer
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