One of the underlying problems that led to the global recession was the US relying too much on borrowing from the rest of the world and China relying too much on lending. That played out in both countries’ trade patterns: The US ran big deficits, and China huge surpluses. In the brief period when the world’s 20 largest economies were working closely together through the G20, they agreed to fix this problem: China would stimulate domestic demand; the US would work on fixing its trade balance.
How has it worked out? This chart gives you a sense, by showing exports of goods and services as a percentage of each country’s total economy (Germany is included, but we’ll say more on that shortly):
Today, we saw the US trade deficit shrink to its smallest level since 2009 in November—a mere $34 billion separate the country’s imports from its exports, thanks largely to America’s recent oil boom driving a record $195 billion in exports. That reflects a small but real rebalancing, shown in the chart above as a 2.5 percentage point increase in exports as a share of GDP since 2006. China has done even more, reducing exports as a share of its economy by 12 percentage points, a feat made more impressive by the fact that its economy has continued growing like gangbusters.
“Look at the difference between advanced and emerging economies, how much rebalancing there already has been in China—exports close to 35% of its GDP, now close to 25% of GDP, China really has rebalanced to a fairly significant extent,” economist Pankaj Ghemawat told Quartz. “[That is] one of the reasons why world trade is a bit lower than it otherwise would be—if China simply maintained its share, we might be setting all-time highs of trade as a percentage of GDP. It’s a positive change compared to Germany, looking at the data, to rebalance within in Europe the way the Chinese had already done.”
Germany has also been urged to rebalance its economy toward domestic demand as part of the cure for the euro crisis, which is exacerbated by the fact that disparate European economies share a single monetary policy. As long as Germany exports far more than it imports from its regional partners, they will face a hard slog growing enough on their own to shed their heavy debt loads. But Germany’s reliance on exports has only increased in recent years, surging to a full 51% of GDP in 2012.
That would suggest, at least on this issue, that China is cooperating more with the rest of the global economy than Germany.