LEX “Rebalancing” the global economy sounds terrific. But however appealing the concept, evoked again by the International Monetary Fund this week, no one appears to have the wherewithal to achieve it. Consider Asia, where it is understood that policymakers should try to wean their economies off a dependency on exports, work down reserves and leave free-floating currencies to fend for themselves.
Almost without exception, they are failing on all three counts. Only China has meaningfully pushed toward domestic demand, largely via investment, to support growth. Everywhere else, it was mostly the sharp turnround in net exports that boosted real growth in gross domestic product in the first half. Investment as a proportion of GDP fell, while private consumption was roughly flat. And if “rebalancing” means whittling down reserves, forget it. China, the world’s biggest hoarder, is in no mood to share. After rising by a modest $7.7bn in the first quarter, China’s reserves surged $178bn in the second quarter to $2,132bn. Weekly data from India and Thailand show accelerations in reserve growth in the first half of September. A year ago, Asia held 62 per cent of the world’s reserve assets; it now holds 66 per cent.
