China and the world economy

From T-shirts to T-bonds

Beijing, not Washington, increasingly takes the decisions that affect workers, companies, financial markets and economies everywhere

GLOBAL tremors in the currency, bond and commodity markets greeted China's announcement that the yuan will no longer be pegged to the dollar. No longer is it just Washington that has the power to cause shockwaves. For many people, the tremors reflected the view that China is the root cause of America's trade deficit, and that the revaluation is a partial cure.

In fact, that view is wrong on several counts. China is not the main cause of the American trade deficit. On the other hand, China is behind almost everything else going on in the world economy. For China is beginning to drive, in a new and pervasive way, economic trends that many countries assume to be domestically determined.

Americans like to slap the “made in China” label on their huge trade deficit. Yet not only is China's forecast current-account surplus of around $100 billion this year only a fraction of America's likely deficit of $800 billion, but, as chart 1 shows, most of the increase in America's trade deficit has come from outside China. The main cause of America's trade deficit is a lack of domestic saving, not unfair Chinese competition. The deficit is thus made in America, not made in China.

As for last week's revaluation, the announcement marked a significant break with the past. China has long been under pressure to revalue its currency from countries that claim the undervalued yuan gives Chinese exporters an unfair advantage. After pegging the yuan to the dollar for a decade, China has shifted to a managed float against a basket of currencies, with an initial revaluation against the dollar of 2.1%. Nobody is yet sure how this will work. It may be just a token move aimed at warding off American protectionism. Or it could be the first of several revaluations, marking the end of the so-called “revived Bretton Woods system”, under which China and other Asian countries have bought billions of dollars in foreign-exchange reserves to hold their currencies steady against the greenback.

Either way, the tiny revaluation by itself will have little impact on America's huge trade deficit. Indeed, even if the yuan is allowed to rise by another 5-10% over the next 12 months, as many economists expect, that would hardly make a dent in the deficit. Nevertheless, it is still an important change in China's exchange-rate regime, representing a step towards a market-based system. And, as such, it could have implications for the dollar, bond yields, and American consumer spending.

To view China's global impact mainly in terms of its exports and its trade surplus is to misunderstand, and to underestimate, the profound forces behind China's growing influence. Everyone knows that most TVs and T-shirts are made in China. But so, in some ways, are developed countries' inflation rates, interest rates, wages, profits, oil prices and even house prices—or at least they are strongly influenced by what happens in China.

Of course, China is not the only fast-growing emerging economy that is making waves around the world. But China really does loom much larger: its contribution to global GDP growth since 2000 has been almost twice as large as that of the next three biggest emerging economies, India, Brazil and Russia, combined. Moreover, there is another crucial reason why China's integration into the world economy is today having a bigger global impact than other emerging economies, or than Japan did during its period of rapid growth from the mid-1950s onwards. Uniquely, China combines a vast supply of cheap labour with an economy that is (for its size) unusually open to the rest of the world, in terms of trade and foreign direct investment. The sum of its total exports and imports of goods and services amounts to around 75% of China's GDP; in Japan, India and Brazil the figure is 25-30% (see chart 2). As a result, the dragon's awakening is more traumatic for the rest of the world.

Doubling the world's workforce

Most analysis of China's growing importance focuses on its rising share of global output and exports. That, in turn, fuels fears that China is stealing production and jobs from the rest of the world. But this misses half the story. It is true that China's trade surplus has increased sharply this year—mainly because the government's efforts to cool fixed investment have cut back imports. But over the past decade, China's imports have risen at the same pace as its exports. So China is giving a big boost to both global supply and demand.

China's impact on the world economy can best be understood as what economists call a “positive supply-side shock”. Richard Freeman, an economist at Harvard University, reckons that the entry into the world economy of China, India and the former Soviet Union has, in effect, doubled the global labour force (China accounts for more than half of this increase). This has increased the world's potential growth rate, helped to hold down inflation and triggered changes in the relative prices of labour, capital, goods and assets.

The new entrants to the global economy brought with them little capital of economic value. So, with twice as many workers and little change in the size of the global capital stock, the ratio of global capital to labour has fallen by almost half in a matter of years: probably the biggest such shift in history. And, since this ratio determines the relative returns to labour and capital, it goes a long way to explain recent trends in wages and profits.

In America, Europe and Japan, the pace of growth in real wages has been unusually weak in recent years. Indeed, measured by the growth in income from employment, this is America's weakest recovery for decades. According to Stephen Roach, an economist at Morgan Stanley, American private-sector workers' total compensation (wages plus benefits) has risen by only 11% in real terms since November 2001, the trough of the recession, compared with an average gain of 17% over the equivalent period of the five previous recoveries (see chart 3). In most developed countries, average real wages have lagged well behind productivity gains.

The entry of China's vast army of cheap workers into the international system of production and trade has reduced the bargaining power of workers in developed economies. Although the absolute number of jobs outsourced from developed countries to China remains small, the threat that firms could produce offshore helps to keep a lid on wages. In most developed countries, wages as a proportion of total national income are currently close to their lowest level for decades.

The flip side is that profits are grabbing a bigger slice of the cake (see chart 4). Last year, America's after-tax profits rose to their highest as a proportion of GDP for 75 years; the shares of profit in the euro area and Japan are also close to their highest for at least 25 years. This is exactly what economic theory would predict. China's emergence into the world economy has made labour relatively abundant and capital relatively scarce, and so the relative return to capital has risen. It is ironic that western capitalists can thank the world's biggest communist country for their good fortune.

China's main impact on the world economy is to change relative prices and incomes. Not only are the prices of the goods that China exports falling; the prices of the goods that it imports are rising, notably oil and other raw materials. China is already the world's biggest consumer of many commodities, such as aluminium, steel, copper and coal, and the second-biggest consumer of oil, so changes in Chinese demand have a big impact on world prices.

China has accounted for one-third of the increase in global oil demand since 2000 and so must bear some of the blame for higher oil prices. Likewise, if China's economy stumbles, then so will oil prices. However, with China's oil consumption per person still only one-fifteenth of that in America, it is inevitable that China's energy demands will grow over the years in step with its income.

There is currently only one car for every 70 people in China, against one car for every two Americans. That implies a huge increase in oil demand, which could keep prices high for the foreseeable future, because of scarce global spare capacity. China's consumption per person of raw materials, such as copper and aluminium, is also still low, so rising demand will continue to support commodity prices.

Cheap money

Overall, the upward pressure that Chinese imports of raw materials have put on the prices of oil and other commodities has been more than offset by the downward pressure of Chinese manufactured exports. As a result, another important aspect of the China effect is low inflation.

Central bankers like to take all the credit for the defeat of inflation, but China has given them a big helping hand in recent years. China's ability to produce more cheaply has pushed down the prices of many goods worldwide, as well as restraining wage pressures in developed economies. For instance, the average prices of shoes and clothing in America have fallen by 10% over the past ten years—a drop of 35% in real terms.

The People’s Bank of China publishes a solemn statement on the revaluation of the yuan. The BIS released its annual report in June. Richard Freeman is an economist at Harvard University. The Office of the United States Trade Representative has more on Sino-American relations. See also the Treasury, Federal Reserve and Dresdner Kleinwort Wasserstein.

A study by Dresdner Kleinwort Wasserstein reckons that China has knocked almost a full percentage-point off America's inflation rate in recent years. The recent 2% revaluation of the yuan will probably be absorbed by Chinese manufacturers trimming their profit margins and so will not be passed on into export prices. But Americans calling for a 25-30% revaluation may come to regret it: the result would almost certainly be faster inflation.

As it is, China's reduction of inflationary pressures has allowed central banks to hold interest rates lower than they otherwise would be. Three and a half years into its recovery, America's real short-term interest rates are only 0.7%, almost two percentage-points below their average at the equivalent stage in previous recoveries since 1960. This is good news for borrowers, but some economists worry that the entry of China and other emerging countries into the global economy may have affected monetary policy in ways that central banks do not fully understand.

In its latest annual report, the Bank for International Settlements (BIS) asks whether it is really desirable to maintain positive inflation rates when China is boosting the world's productive potential so dramatically and thus reducing the prices of so many goods. In other words, are central banks targeting too high a rate of inflation now that China has joined the global market economy?

During the late 19th-century era of rapid globalisation, falling average prices were quite common. This “good deflation”, which was accompanied by robust growth, is very different to the bad deflation experienced in the 1930s depression. Today, we would again have had “good deflation”—but central banks have instead held interest rates low in order to meet their inflation targets. The BIS frets that this has encouraged excessive credit growth.

中国与世界经济：

从T恤到国库券

北京而不是华盛顿逐渐作出了影响世界各地工人、公司、金融市场和经济的决定。

    中国宣布人民币不再盯住美元以后，全球的货币、债券和矿产品市场都发生了震荡。现在，有能力造成冲击波的不仅仅只有华盛顿了。在许多人看来，这种震荡反映了一种观点，即中国是美国贸易逆差的根源，而人民币升值是消除逆差的方法之一。

事实上，从几方面来看，这样的观点并不正确。中国并不是美国贸易逆差的主要原因。另一方面，中国几乎推动着世界经济正在发生的一切，因为中国正以一种新的普遍的方式推动着在许多国家看来由国内因素决定的经济趋势。

美国人喜欢为其巨额贸易逆差贴上“中国制造”的标签。然而，据预测，中国今年的贸易顺差约为1000亿美元，这只是美国可能达到的8000亿美元财政赤字的一小部分，而且美国贸易逆差的日益增加大多源于中国以外的国家。造成美国贸易逆差的主要原因是国内储蓄少，而不是来自中国的不公平竞争。因此，美国的贸易逆差是由美国制造的，而非中国制造的。

上星期的人民币升值的宣告表明了一个重大的转折。一直以来，中国都受到了来自其他国家要求人民币升值的压力，这些国家宣称廉价人民币是中国出口商进行非平等竞争的优势所在。在人民币紧盯美元十年之后，中国已经采取了由政府操纵的汇率浮动，最初的人民币和美元汇率上升了2.1％。但是，没有人能够预料这会运行得如何。或许，这有可能是人民币升值的开始，旨在避开美国的贸易保护主义；或者，这有可能只是第一次人民币升值而已，代表了所谓的“重新恢复的布雷顿森林货币系统”的结束，在这一系统下，为了能够与美元汇率保持稳定，中国和其他一些亚洲国家已经在外币储备银行购买了几十亿美元。

不管怎样，微小的升值本身对于美国巨额贸易逆差几乎没有任何冲击。的确，即使在接下来的12个月里人民币如很多经济学家预测的那样可能再升值5到10个百分点，这依然未能对贸易逆差产生丝毫影响。虽然如此，这仍然是中国汇率体系的一大重要变化，标志着中国又向市场经济体制迈出了一步。同样，这也有可能会对美元、公债利息和消费产生影响。

    如果主要从中国的出口和贸易顺差来看待中国对全球的影响，那么就会误解并低估中国日益扩大的影响背后的深层力量。大家都知道大部分电视和T恤衫都产自中国。不过从某种意义上，发达国家的通货膨胀率、利率、工资、利润、油价甚至是房价也都是这样——至少它们也都受到了中国的巨大影响。

当然，中国并不是惟一快速发展并给世界带来冲击的新兴国家。不过，中国的确更加突出一些：自从2000年以来，中国对全球GDP增长的贡献比后三个新兴经济体——印度、巴西和俄罗斯——加在一起的总和还要多近一倍。而且，还有另外一个重要原因可以说明为什么今天中国融入世界经济的进程会比其他新兴经济体给世界带来更大的冲击，或者比上世纪50年代中期快速增长的日本给世界带来的冲击都还要大。特别要指出的是，从贸易和外国直接投资来说，中国的独到之处把大量廉价劳动力和开放的经济结合起来。中国经济对外开放的程度都特别高。进出口商品和服务的总额占中国GDP的75％左右。在日本、印度和巴西，这个数字是25％到30％（见图2）。因此，睡龙猛醒对世界上其他国家将会产生更大的影响。

世界劳动力双翻

中国在世界上日益增强的重要性的大多数分析都围绕着其在产出和出口方面日益增长的份额展开的。这反过来也点燃了世界上其他国家的恐惧感，担心中国正在“窃取”产业和就业机会。但事情并非完全如此。诚然，今年中国的贸易顺差迅猛上升，这主要是因为政府降低固定资产投资的政策导致进口额下降。然而，在过去的十年中，中国的进口额增长率一直同出口额增长率保持着同步水平。所以中国极大地推动了全球的供应和需求。

中国对世界经济的影响可以理解为经济学家们所说的“积极的供应冲击”。哈佛大学的经济学家理查德·弗里曼认为，中国、印度和前苏联纳入世界经济的结果就是将世界劳动力的数量翻了一番（中国占增幅的一半以上）。这提高了世界经济增长潜力，降低了通货膨胀率，并引起了劳动力、资本、商品和资产的相对价格发生改变。

新加入世界经济的国家并没有带来多少具有经济价值的资本。所以，由于工人的数量翻番、全球资本市场的规模几乎没有变化，全球资本与劳动力的比率在几年之内降低了近一半，这也许是历史上最大的变化。由于该比率决定了劳动力和资本的相对收益率，所以它就能足以说明近来工资和利润上的趋势。

在美国、欧洲和日本，实际工资的增幅近年来特别小。根据就业收入增长，这的确是美国几十年来美国最小幅度的经济恢复。摩根斯坦利公司的经济学家斯蒂芬·罗奇指出，美国私营部门雇员的总报酬（工资加津贴）自2001年11月经济衰退最低点以来仅增加了11％，而以前5次经济复苏的同期平均报酬增加幅度为17％（见图3）。在大多数发达国家，平均实际工资都远远落后于生产力的收益。　

中国的廉价劳动力大军进入国际生产和贸易系统减少了发达经济体中劳动力讨价还价的余地。尽管发达国家外包给中国的工作职位的绝对数量还很小，但企业可能到海外从事生产的威胁令国内工作者的工资难以上浮。在大多数发达国家，工资目前在国民总收入的构成比例中接近了数十年来的最低点。

另一方面，利润在国民总收入中占的比重越来越大（见图4）。去年，美国的税后利润在国内生产总值中的比例达到了75年以来的最大值。欧盟和日本的利润比例也接近以往至少25年中的顶点。这与经济理论的预测完全符合。中国在世界经济中的崛起导致了劳动力相对丰富而资本相对稀缺，因此资本回报率上升了。富有讽刺意味的是，西方资本家们要为自己的财源滚滚而感谢这个世界上最大的共产主义国家。

中国对世界经济的主要影响在于其改变了相关价格和收入。不仅中国出口的那些商品价格会下降，它进口的那些商品价格也会上升，特别是石油和其他原材料。中国已经是世界上很多种矿产品的最大消费国，比如铝、钢、铜和煤炭，而且是石油的第二大消费国。因此中国需求的变化会对世界价格产生巨大影响。

自2000年以来，全球石油需求增幅的1／3是由中国造成的，因此它必然要为油价的升高负一定责任。同样的，如果中国经济受挫，油价也会下跌。然而，鉴于中国人均石油消费仍然仅为美国的1／15，中国的能源需求在相当长一段时间内必然会随其收入的增加而水涨船高。

目前中国平均每70个人才保有一辆汽车，而在美国每两个人就拥有一辆。这意味着石油需求将大幅攀升，再加上全球闲置产油能力很小，因此油价在可预见的未来会居高不下。中国的人均原料（例如铝和铜）消费量也还很低，因此不断增长的需求将继续维持矿产品的价格。

廉价货币

总的来说，中国的原材料进口给石油和其他农矿产品价格带来的上升压力，已经被中国制成品出口的下降压力大大抵消。结果，中国效应的另一个重要方面是低通货膨胀。

中央银行家们喜欢把制服通货膨胀的功劳归于自己，但是中国最近几年里给他们帮了大忙。中国生产廉价产品的能力使全世界许多商品的价格下降，同时也抑制了发达经济体的工资压力。例如，美国的鞋类和服装的平均价格在过去10年里下降了10％——实际下降了35％。

中国人民银行发布了一条关于人民币升值的正式声明。今年6月，国际清算银行发布了其年度报告。理查德·弗里曼是哈佛大学的经济学家。美国贸易代表办公室能够提供更多有关中美关系方面的信息。同样，美国国家财政部、美联储和Dresdner Kleinwort Wasserstein也有这方面的信息。

Dresdner Kleinwort Wasserstein的研究表明，近年来中国使美国的通货膨胀率降低了近一个百分点。人民币升值2％是因为中国制造商的让利，而不会转移到出口价格中去。但是，要求人民币升值25％—30％的美国人会对此感到遗憾：这样的升值几乎肯定会使通货膨胀速度加快。

事实上，中国帮助降低通货膨胀压力使中央银行能够压低利率。美国经济已经出现了三年半的复苏，它的实际短期利率只有0.7％，比1960年以来历次经济复苏相同阶段的平均通货膨胀率低将近两个百分点。对借款人来说，这无疑是好消息，但是一些经济学家担心，中国和其他一些新兴国家进入全球经济可能会对货币政策产生中央银行不能完全了解的影响。

国际清算银行在最新的年度报告中提出的问题是，当中国如此明显地提高全世界的生产潜力并且使那么多的商品降价时，保持积极的通货膨胀率是否确实可取？换言之，中央银行是否因为中国已经加入全球市场经济而把通货膨胀率的目标定得过高呢？

在19世纪末的快速全球化时代，均价的下降十分普遍。这种“有利的通货紧缩”又伴随着迅猛的增长，与20世纪30年代大萧条期间出现的不利通货紧缩截然不同。如今，我们会再次遇到“有利的通货紧缩”，但是中央银行反而压低利率，以便达到它们的通货膨胀目标。令国际清算银行苦恼的是，这助长了过度的信贷增长。