The United States and the PRC: macroeconomic imbalances and economic diplomacy

USDA China

Article Highlights

  • Over the last decade, macroeconomic imbalances between the US and the PRC have grown significantly.

    Tweet This

  • Policy instruments that could potentially bring change have been the subject of intense political debate in US and the PRC

    Tweet This

  • Questions of how to address macroeconomic imbalance between US and PRC seem unlikely to lose prominence

    Tweet This

ABSTRACT

Macroeconomic Imbalances and Economic Diplomacy

Download PDF
This paper explores the ways in which macroeconomic imbalances have driven policy discussions between the United States (US) and People’s Republic of China (PRC) in the last decade. The PRC’s current account surplus, its growing foreign exchange reserves, and its shifting policies on exchange rate adjustment have become a central preoccupation of US trade policy. The paper considers the evolving political economy of the US policy stance and of the PRC’s response; it assesses the opportunity costs of an approach that has sometimes focused on the exchange rate to the exclusion of other issues; and it explores the ramifications for economic governance in the short- and medium-run. The paper finds that there has been ample mutual misunderstanding between the US and the PRC in their economic arguments; that the momentous debates have the potential to severely impair the institutions of global economic governance; and that there is likely to be an important race between economic and demographic forces that will naturally redress the imbalances and the political imperatives for each country to stand tough and fight.

Philip I. Levy is a resident scholar at AEI.

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Philip I.
Levy

What's new on AEI

AEI Election Watch 2014: What will happen and why it matters
image A nation divided by marriage
image Teaching reform
image Socialist party pushing $20 minimum wage defends $13-an-hour job listing
AEI on Facebook
Events Calendar
  • 20
    MON
  • 21
    TUE
  • 22
    WED
  • 23
    THU
  • 24
    FRI
Monday, October 20, 2014 | 2:00 p.m. – 3:30 p.m.
Warfare beneath the waves: The undersea domain in Asia

We welcome you to join us for a panel discussion of the undersea military competition occurring in Asia and what it means for the United States and its allies.

Tuesday, October 21, 2014 | 8:30 a.m. – 10:00 a.m.
AEI Election Watch 2014: What will happen and why it matters

AEI’s Election Watch is back! Please join us for two sessions of the longest-running election program in Washington, DC. 

Wednesday, October 22, 2014 | 1:00 p.m. – 2:30 p.m.
What now for the Common Core?

We welcome you to join us at AEI for a discussion of what’s next for the Common Core.

Event Registration is Closed
Thursday, October 23, 2014 | 10:00 a.m. – 11:00 a.m.
Brazil’s presidential election: Real challenges, real choices

Please join AEI for a discussion examining each candidate’s platform and prospects for victory and the impact that a possible shift toward free-market policies in Brazil might have on South America as a whole.

Event Registration is Closed
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.