Different Approaches in Addressing Internal and External Economic Imbalances

This article analyzes the internal and external imbalances of China’s economy from a global perspective. The author believes that trade surplus and savings surplus are not the absolute metrics to define a country’s economic strength. China’s balance of payments has continued to maintain a big surplus, which shows China’s unique economic structure and growth model and exposes deep contradictions in income distribution, factor prices and resource allocation. While stimulating rapid growth, the imbalance of China’s economy, at the same time, has long delayed the upgrading of industrial structure, aggravating the threat of inflation and heightening concerns of an asset bubble. Although the external and internal imbalances are closely linked to each other, they are quite different in nature. This similar global economic imbalance has existed for a long time, and to a great extent, is inevitable and rational. However, internal imbalances caused by its own systems and policies, if lasted, would have severe and negative impacts not only on China’s economy, but on the global economy as a whole.