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current account deficit, while on the other hand, emerging economies, especially China, run a long-term current account surplus.
To this phenomenon, i.e. global imbalance, there are many theoretical explanations. For the deficit countries, taking United States as an example, dominant role of US dollar in the international monetary system, overconsumption driven by reckless policies and too lenient social welfare, are some drivers to deficit.
For the surplus countries, taking China as an example, industrialisation, export-led economic growth model, and “saving glut” (as Federal Bank Governor Ben Bernanke named it) caused by problem of income distribution and lack of social safety network, are believed to be the fundamental of surplus.
I agree with these explanations. But I also want to add another one: global imbalance, to some extent, is just a natural result of labour division between developed and less developed countries in the context of globalisation and industrialisation process happened in later ones, such as China.
Whatever, we need not to waste time on figuring out who should be blamed for this imbalance. We just need to do something, to correct or re-balance the imbalance if it can’t sustain by itself due to this global crisis. In this respect, it’s no doubt that responsibility relies on both surplus and deficit countries — both of two needs to adjust their domestic economic model and policies.
Luckily, China, as a main surplus country in the past decade, now is undergoing a significant re-balance process: the ratio of net export to GDP has already declined from more than 9 percent in 2007 to 2,8 percent last year. And contribution of net export to GDP growth is expected to be even lower in this year.
The re-balance process of China economy is not just a consequence of decline of demand from developed countries for China export.
I think it’s also an encouraging signal of development model transformation that Chinese economy is experiencing and will experience in the second and third decade of this century. This transformation is urbanisation. In the past 30 years, urbanisation in China lacked much behind than and actually has been driven by industrialisation.
In the process of this kind of urbanisation, i.e. urbanisation led by industrialisation, rural residents move to cities for the jobs in the manufacturing industry.
Although they can get higher income than that in agricultural sector, most of these rural residents have no opportunity to become real urban residents.
Just like migrant birds, during every Chinese New Year, they have to move between cities where they work and countryside where their families reside. Therefore, they are dubbed as “migrant workers”.
The straight result of this kind urbanisation is high saving rate and low consumption rate. Because, without social welfare enjoyed mainly by urban residents and no permanent habitat in city, these migrant workers have to save for their future and only spend money on necessities such as food, and clothing in cities, while their expenditure on housing, durable goods, education and medical care remain in rural areas.
This kind of urbanisation is undergoing a dramatic change now. First, after this global crisis, the eastern coastal region, where China’s manufacturing industry heavily concentrates, has to forgo many low-technology and labour-intensive industries because of increasing cost of factors and urging need to upgrade technology and industry.
These relatively low technological and labour-intensive industries then move to hinterland and western regions with comparative advantage in factor cost.
This move not only creates an economic boom in these regions — actually, the global crisis is viewed as a great opportunity and hailed by many local officials of these regions, but also, to the large extent, solve the habitat problem of migrant workers because now they can work and have much more opportunities to buy apartments in the small towns near their homes.
Second, with the demographic transition, the so-called “new generation migrant workers”, children of the first generation migrant workers, have become the main bulk of migrant workers.
According to the statistics of 2010, from the National Bureau of Statistics, the number of the new generation migrant workers amounted to more than 100 million, accounting for 60 percent of the total migrant population. This new generation is no longer satisfied with scraping by living far away from home, they increasingly tend to settle down in cities where they work and they ask for higher payment and better social services for their work.
The shift from the “migrant bird” to permanent residency not only demands the stable development of manufacturing industry, but also brings tremendous new needs for urban service sector, social management system and public services.
All these implications can be translated into one thing: less dependency on external demand. That is to say, the re-balance responsibility on China’s side may most probably be fulfilled, although we still have great challenges in many respects, such as reform of financial system and social networks. So, will surplus countries be able to do that? As we see, the deficit of United States is still 4 percent of GDP, nearly equal to the level before crisis.
Re-balance of world economy is our common responsibility and prerequisite of global prosperity. — Xinhua.
Online Reporter