"Imbalance" and "Re-balance" of World Economic Development

For a long time, people have in general admitted that the world economy is out of balance, and that "imbalance" resulted gradually in the process of economic globalization. Hence there is a consensus that "after the loss of balance there arises the need for re-balance". However, in the past three decades, great changes have occurred in the meaning of "imbalance" and "balance".

This "imbalance" is not that "imbalance"?

With the development of economic globalization, a new interpretation and understanding has arisen around the concept of world economy imbalance, which is a departure from its original sense. This shift of meaning has had colossal impact on China, and this impact has been increasingly negative.

The term "world economic imbalance" is probably not a new concept. In the 20th century, people talked extensively about world economy imbalance, and the need for balance after the imbalance in the world economy, in facilitating the sustainable development of the world economy.

At that time when people explored the imbalance of the world economy, they meant that in this global village there are rich economies and poor economies. They were actually talking about the relationship between the south and the north in the world. The "imbalance" was related to the imbalance between the rich and the poor in the south-north economic relationship and suggested that there is po-verty in affluence. Meanwhile, "balance" suggested that the rich economies have an obligation to give assistance to the developing economies in their economic development. It was the issue of how to develop developing economies. It is only when developing economies are developed that the entire global village and the entire world economy can benefit from comprehensive development. Hence the 1990s saw the fully-fledged development under the United Nations Millennium Development Goals (MDGs).

Under these conditions, China's economic development should benefit from the support. This is because China is the world's largest developing country, embodying the largest number of poverty-stricken groups in the world. We can actually say that the poor populations in China and India add up to over half of the world's poor population. If the problem of poverty in these two countries is solved, half of the poverty-related problems in the world will be solved.

From the perspective of the global fight against poverty, China's reform and liberalization has gained the approval and support of the whole world. Hence in the 1980s and 1990s, the entire world applauded and supported China's reform and liberalization. When China needs capital, foreign capital will flow in. When China needs markets, other countries will open up their markets. When China needs technology, the relevant technological transfers will be made. This arose from one objective—that the world needs to fight poverty, to have balance, and to have sustainable development. The whole world has agreed that the developed countries have the obligation to help the developing countries to eliminate poverty. Hence China's position at that time was highly advantageous.

Into the 21st century, the imbalance of the world economy remained. However, the meaning of world economic imbalance has taken on a different meaning. Now the vocabulary has changed. The imbalance is no longer that between the rich and the poor, but the imbalance between Japan and the US in terms of trade. As a result,people talked about re-balancing the global economy.

This time, the imbalance suggests the loss of balance in the current account of balance of payments between the developed countries and the countries with newly developed markets, leading to the lack of sustainability in the world economy. Now, "re-balance" suggests the re-balancing of the balance of payments, or the enormous trade surplus that newly-developed markets need to eliminate. If we take a careful look, we will see that China is today one of the largest countries on the earth with the greatest trade surplus, and the country with the greatest foreign exchange reserve. The most prominent countries with the greatest surplus and the greatest deficit in world trade are China and the US respectively.

According to the latest trade data released by the International Monetary Fund (IMF) in October 2014, Germany has replaced China as the economy with the largest trade surplus. The result was that Germany was immediately criticized by many countries (including the US) as well as international economic organizations. They thought that to realize economic growth through exporting more than importing resulted in sacrificing other economic interests and hindered the revival of the European economy. This did not address the issue that China has fundamentally improved its own development climate. Although Western countries such as the US, as well as some international economic organizations,have temporarily leveled their criticism against Germany, out of certain immediate interests, the fact remains that in the long run, Western countries such as the US will still treat China as their primary target of their accusation, putting various forms of pressure on China in the areas of economic development and export.

Against this background, developed countries demand that China reduce the trade surplus and contribute to the re-balancing of the entire world. This puts the total development of China in a rather disadvantageous position.

This conveys the message that the past issue of "balance" between the rich and the poor has been relegated to a secondary status, and now the issue is to "re-balance" the unbalanced current account of the world. For countries with newly emerged market economies, especially China, the trade surplus should be drastically reduced in order to help the developed countries, especially the US, to overcome their trade deficits.

We can say that the current theme of the world economy is re-balance in order to create inclusive and sustainable growth. Meanwhile, the past issue of bridging the gap between the rich and the poor is no longer the core issue in the governance and cooperation of the international economy. The development agenda that we can still mention is no longer the balancing of the world economy, but green development. Against this background, contradiction and entanglement will inevitably become the norm