How to handle global economic imbalances

Regardless of whether we admit it or not, the financial crisis is deeply related to global economic imbalances. Currently, the world seems to have weathered the crisis and people envisage a new, post-crisis world order. If global imbalances are to be blamed for the crisis, then it is of little significance to discuss a new world order before identifying the causes of imbalances.

It is generally believed that the overspending spree in countries with huge trade deficits and the excessive savings in trade-surplus states caused global economic imbalances. Outwardly, this argument is reasonable and has been accepted by academicians and policymakers. Based on the assumption, economists wrote a "prescription" for avoiding crises: Increase consumption in trade-surplus countries and savings in trade-deficit countries. Indeed, since the beginning of this year, some positive signs seem to be emerging in countries with trade deficit, such as increasing savings in the US. So, people began to suspect that with the decline of the US spending, whether the export-oriented growth pattern in trade-surplus countries, with China as the representative, could keep up.

Unfortunately, the rising deposit in the US is very likely to be temporary and irrespective of people's will, and trade-surplus countries will still maintain the export-oriented growth model. I believe that it is the long-term factors that influenced the international division of labor, causing imbalances that could not be avoided through readjusting short-dated factors.