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A tale of two economies

(China Daily)
Updated: 2009-11-20 07:56

China's need to cut its dependence on exports for growth is as urgent as the newly found US determination to pursue export-led growth.

However, if the two economies are to shift rapidly away from their current growth patterns, which look increasingly unsustainable as some say, they must work more closely together to find a way out. Their success will be crucial to rebalancing the world economy and sustaining the global recovery.

On Wednesday, Premier Wen Jiabao assured visiting US President Barack Obama in Beijing that China does not pursue a trade surplus. This represents a sort of response to the announcement that the US president made a few days earlier in Japan that his country is shifting its economy to export-led growth.

Bilateral trade volume between China and the United States has increased greatly since the two countries established diplomatic ties 30 years ago. Meanwhile, China's ballooning trade surplus with the US has also highlighted the growing imbalance that had Chinese overproduction feeding US over-consumption for many years.

Now, the worst global economic crisis in decades has forced China, the largest developing economy, and the US, the world's biggest economy, to decisively change their growth patterns for the benefit of both countries and the world economy.

Given the tremendous potential of Chinese consumers and the obvious competitiveness of US companies in a number of sectors, a more balanced bilateral trade is fully possible and desirable as well.

Wen expressed hope that the United States lifts its policy of restricting hi-tech products exports to China and increases their proportion in US exports to China.

This is a realistic approach for the two countries to better balance bilateral trade.

Related readings:  US seeks China office to ensure export safety  China defends export policy against US, EU complaints  US urges increased export to China  US business community calls for lift of export control to China

As a fast-growing developing economy, China's comparative advantage of inexpensive and relatively skilled labor force will definitely enable it to continue to excel in manufacturing. Hence, China's change of growth pattern does not necessarily involve a decline of Chinese exports. Instead, the major task for the Chinese government is to substantially cut down import duties to fuel a domestic consumption boom with more and better choices.

As a debt-laden economy, the US can no longer expect to spend its way out of the crisis. It is necessary for the country to expand exports to narrow its trade deficit.

Yet, pursuing export-led growth does not mean the US government should support all US exporters regardless of their international competitiveness.

Many hi-tech US companies have a sharp competitive edge. And the vast Chinese market can help them not only survive but thrive in the current economic slowdown.

It is high time for the two countries to strengthen cooperation for more balanced bilateral trade and a lasting global recovery.