Global Specialization and the China-US Economic Imbalance

By Min Gong.

Published by The Global Studies Journal

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Article: Print $US10.00
Article: Electronic $US5.00

In this paper, I first describe the development of the China-US economic relations with China’s integration into the world economy in the late 1990s. Second, I analyze the China-US economic imbalance from a perspective of economic integration and global specialization between China and its main trade partners in regional and world economies. I find that trade imbalances among China and its main trade partners can be considered as an outcome of global specialization, which can be explained by its role as a trade bridge between the industrialized East (Japan and South Korea) and the industrialized West (the US and EU). Global specialization based on their dynamic comparative advantage contributes more to economic imbalance between China and the US than the relative value of their currency. In the long run, the division of labor and comparative advantage is going to rule the world economy, making the US trade deficit sustainable. As compared to currency appreciation, wage increases are more effective not only in rebalancing China’s external imbalance but also in promoting changes in China’s comparative advantage.

Keywords: Economic Imbalance, Global Specialization, China

Global Studies Journal, Volume 3, Issue 4, pp.63-76. Article: Print (Spiral Bound). Article: Electronic (PDF File; 676.135KB).

Min Gong

Professor of Economics, Center for Macroeconomic Research, Xiamen University, Xiamen, Fujian, China

Min Gong is a Professor of Economics and the Vice Director of the Center for Macroeconomic Research at Xiamen University, Fujian. She holds a Ph.D. in economics from Fudan University, Shanghai, served as a visiting scholar at the Institution for Economic Research at Hitotsubashi University, Tokyo, and as a Freeman Fellow at the Center for East Asian and Pacific Studies at the University of Illiois at Urbana-Champaign. Her research field includes economic growth, macroeconomic policy and international economics.

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