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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.
Until policymakers in Beijing enact major budgetary reforms to address the sources of China's low consumption-to-GDP ratio, economic imbalances and trade tensions with the West will persist.
Taiwan’s opposition Democratic Progressive Party is struggling to win centrist voters, who want to avoid friction with mainland China, without alienating their anti-mainland base.
The transformation of China into an economic powerhouse will fundamentally alter Beijing’s relationship with the global economy and require far-reaching changes in the global institutional architecture.
The current cycle of globalization could end in a painful period of debt adjustment and payment imbalances across the globe, with a likely slowdown of growth in China, a possible abandonment of the euro, and the risk of increasing U.S. protectionism.
While assessments of Chinese economic imbalances often rely on flawed statistics that understate consumption and overestimate investment, the country’s share of consumption to GDP will not rise significantly until Beijing increases welfare spending or divests itself of state assets.
The United States must generate more high-value jobs to capitalize on the opportunities presented by a rising China, which is likely to continue to make sustaining double-digit growth a key priority.
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.
While the current U.S. economic tensions are likely to hurt Washington's democracy and human rights agenda as far as Beijing is concerned, they are also likely to help China's international financial situation.
As long as the Chinese government retains its capacity to raise debt, a sharp slowdown in economic growth remains unlikely, at least until 2013.