China and Global Imbalances: It's Not the Exchange Rate

UCLA Center for Chinese Studies presents a talk by Calla Wiemer on China's trade surplus.

Much attention has been lathered on the exchange rate as the prime culprit in China's massive trade surplus with the rest of the world.  But there is an alternative more viable explanation for the phenomenon.  This seminar will make the case that China’s mounting macroeconomic imbalances have been a logical outcome of its extraordinarily rapid economic growth.  High growth pushes up the savings rate.  And savings not absorbed by domestic investment are emitted as capital outflows.  The flip side of this is China’s burgeoning trade surplus, for savings shunted into foreign asset accumulation must derive from export revenues not spent on imports.  An econometric analysis of the savings/growth relationship forms the basis of the argument.

Calla Wiemer is a Visiting Scholar at the UCLA Center for Chinese Studies, a Research Associate at the National University of Singapore East Asian Institute, and a Consultant to the Asian Development Bank.  She has been an observer of the Chinese economy since studying at Nanjing University in 1981 and has just returned home to southern California after four years in Singapore.  Her current projects include studying Chinese savings behavior, writing a macroeconomics textbook for emerging Asia, and advising on economic corridor development in the Greater Mekong Sub-Region.

Useful background tto Dr. Wiemer's talk can be found in her op-ed that appeared in the Wall Street Journal, Asian edition, on January 28. Click here to read the op-ed>>