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China’s relations with the developing world are based on what China calls “South-South, win-win complementarity.”
Beijing needs to reform its labor migration policies and use the profits from state enterprises to fund social services.
Savings rates in deficit countries in Europe had to drop once policy distortions forced up Germany’s savings rate, risking both increased political tension and rising unemployment.
The link between domestic economic policy and its direct impact on global imbalances and trade tensions is not well enough understood.
To assess China's rebalancing in 2013, look for how quickly growth slows, how much debt grows, and the movement of inflation and trade figures. Globally, keep on eye on Target 2, Spanish bonds, and Japanese debt.
China's economic growth is sputtering, the Euro is under threat, and the United States is combating serious trade disadvantages. However, this is not another great recession but rather a critical rebalancing of world economies.
Given the collective nature of China’s decision-making, more attention needs to be given to whether China’s unique form of regional decentralization can continue unchanged.
Rather than being an economic vulnerability, China's banks are too secure. The challenge is to introduce more competition and improve governance of the banking system.
There is a growing body of evidence that security competition risks undermining economic integration in Asia.
Higher growth in China is no longer compatible with a strengthening balance sheet. Fortunately, the current Chinese leadership recognizes the need to implement informs and understands that it is going to be a politically difficult process.