The upbeat note finance ministers and central bankers from the Group of Seven (G7) industrial nations sounded on world economic prospects is a cause for optimism. However, more international cooperation is needed if global economic imbalances are to be properly addressed any time soon.
The G7 meeting last week in Essen, Germany, concluded that global growth has become more balanced and would be around 5 percent this year. This seems consistent with the fact that the global economy has recently enjoyed an era of steady growth, high corporate profitability and relatively relaxed monetary policy.
As risks to growth from expensive energy and inflation have diminished, it is fairly reasonable to expect 2007 will witness the continuation of one of the strongest and most prolonged global expansions in recent decades.
But that rosy prospect does not belie the need for the world's leading economies to strengthen their policy dialogue in order to lessen the global economic and financial market risks.
Though the world's major economies are generally sound, growing US trade deficits against emerging economies in recent years have triggered intense debate over global imbalance.
It simply makes no sense to blame the trade-surplus countries like China for trade imbalance. As a low-labor-cost center, China is naturally positioned to gain a larger manufacturing share in the international market as it is increasingly integrated into the global economy.
The Chinese authorities have keenly realized the necessity to restore external balance by boosting domestic demand.
That is why China has been gradually increasing flexibility in its foreign exchange regime in line with its own plans and economic ability.
Chinese Finance Minister Jin Renqing made it clear at the G7 talks that China will continuously implement macro-adjustment policies, stimulate domestic demand and reform the financial structure.
Yet, to promote the orderly adjustment of the global economic balance, all other countries must also do their own part.
The robust growth prospects for the world economy may partly explain the cheerful mood among financial chiefs. But that is far from enough to correct the global imbalance. The later the needed global adjustment takes place, the dearer the price. Hence, a sense of urgency is needed for financial leaders from both developed and developing countries.
(China Daily 02/12/2007 page4)