Global Imbalances and the Future Position of China in the International Monetary System - 中欧社会论坛 - China Europa Forum

Global Imbalances and the Future Position of China in the International Monetary System

Authors: Michel Aglietta, University Paris X and Cepii

Date: 2007

This paper deals with the world economic regime that has been established since the aftermath of the Asian crisis. It does so both on the macroeconomic and monetary sides. This regime has fostered remarkable growth, but at the cost of mounting financial imbalances. The imbalances are concentrated on the United States because of the asymmetric nature of the international monetary system that can be labeled a semi-dollar standard.

The present regime embodies a contradiction. The accumulation of US debt to foreigners cannot go on forever. It must be stabilized by a macroeconomic adjustment. The paper studies the scenarios that can deliver an orderly adjustment. None can be US-engineered alone. They all need the cooperation of the big Asian creditors. But the present-day international monetary system hampers the adjustment in insulating US money from foreign financial constraints.

Therefore the adjustment will be structural. It will entail domestic demand-led growth cum strong regional integration in Asia. World money will move from the semi-dollar standard to a polycentric system, with the Yuan playing a prominent role in twenty-year time. To manage this more decentralized system, new governance mechanisms will be created, included a reformed IMF, an enlarged club of central bankers and an open inter-governmental group replacing the G7 to debate on the consistency of economic policies.

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