The upbeat note finance ministers and central bankers from the
Group of Seven (G7) industrial nations sounded on world economic
prospects is a cause for optimism. However, more international
cooperation is needed if global economic imbalances are to be
properly addressed any time soon.
The G7 meeting last week in Essen, Germany, concluded that
global growth has become more balanced and would be around 5
percent this year. This seems consistent with the fact that the
global economy has recently enjoyed an era of steady growth, high
corporate profitability and relatively relaxed monetary policy.
As risks to growth from expensive energy and inflation have
diminished, it is fairly reasonable to expect 2007 will witness the
continuation of one of the strongest and most prolonged global
expansions in recent decades.
But that rosy prospect does not belie the need for the world's
leading economies to strengthen their policy dialogue in order to
lessen the global economic and financial market risks.
Though the world's major economies are generally sound, growing
US trade deficits against emerging economies in recent years have
triggered intense debate over global imbalance.
It simply makes no sense to blame the trade-surplus countries
like China for trade imbalance. As a low-labor-cost center, China
is naturally positioned to gain a larger manufacturing share in the
international market as it is increasingly integrated into the
global economy.
The Chinese authorities have keenly realized the necessity to
restore external balance by boosting domestic demand.
That is why China has been gradually increasing flexibility in
its foreign exchange regime in line with its own plans and economic
ability.
Chinese Finance Minister Jin Renqing made it clear at the G7
talks that China will continuously implement macro-adjustment
policies, stimulate domestic demand and reform the financial
structure.
Yet, to promote the orderly adjustment of the global economic
balance, all other countries must also do their own part.
The robust growth prospects for the world economy may partly
explain the cheerful mood among financial chiefs. But that is far
from enough to correct the global imbalance. The later the needed
global adjustment takes place, the dearer the price. Hence, a sense
of urgency is needed for financial leaders from both developed and
developing countries.
(China Daily February 12, 2007)