From Beijing Review:
A country’s overall balance of payments must always balance as a matter of double-entry accounting. Countries that run persistent current-account deficits must be running surpluses in their capital (financial) accounts. The fact that China is running a large current-account surplus with the United States means savings must exceed investments in China, and the excess savings are being used to finance the U.S. twin deficits. In effect, China is providing the resources for U.S. consumers and taxpayers to live beyond their means. Should we bash China for those favors? [Full Text]
James A. Dorn is a China specialist at the Cato Institute and vice president for academic affairs. Read also Free Markets, Not Protectionism, Key To Chinese Economic Reform by him from Australian Financial Review.
