MILAN, Jul 18 (Class Editori) - In times of trade war it may seem a paradox, but trade relations between China and the rest of the world are actually back in balance. At least according to the chief economist of the International Monetary Fund, Gita Gopinath, who reviewed world trade balances in a report. As a result, Beijing's current account surplus is now close to zero, a significant reduction from the 10% of GDP reached in 2007. However, the credit does not go to Donald Trump's tariffs which, according to the IMF, can reduce global growth in an amount between 0.2 and 0.5% by 2020. The Chinese rebalancing is instead the result of the expansionary fiscal and budgetary policies of Beijing, as well as of the greater flexibility of the exchange rates, which led to an effective appreciation of the yuan.
In other words, Chinese growth depends less on exports and more on the domestic market. A recent research carried out by McKinsey highlighted that, in 11 out of the last 16 quarters, domestic consumption contributed more than 60% to the growth of Chinese GDP. If the trade position of China is no longer a global financial risk, the same model cannot be implemented in other countries including Germany and the United States, though for opposite reasons. Berlin has a trade surplus of 7.3% of GDP, which should be used to increase public investment in infrastructure and boost potential growth. On the contrary, according to Gopinath, the American current account balance is in excessive deficit (2.3%) of the GDP: Washington should therefore adopt fiscal consolidation policies, which entail less public spending and/or more taxes, which would not penalize growth.
Too bad the Trump administration's policies are pushing the US in the opposite direction. According to the data just published by the Institute of International Finance, in the first quarter of 2019 the US federal debt increased in one year by 10.4%, reaching its historical maximum of 101%. The total of American liabilities (government, families, financial and non-financial companies) is now close to the record of 70 thousand billion dollars, over a quarter out of the 246 thousand billion of global debt. The contribution of China, whose total debt exceeds 40 thousand billion, 15% of the world total and 310% of the GDP, is not minor.
Also the liabilities of the emerging markets have reached their all-time high at 69 thousand billion, including mostly short-term debts, which make these countries particularly exposed to sudden changes in the risk appetite of global investors. That is why, according to the IMF, the so-called "borrowed" economic growth should be carefully calibrated to avoid excessive imbalances. With the convergence of global central banks on expansive monetary policies, the warning risks remaining unheard. (Reserved reproduction)
(Source:Class Editori)
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