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New Left Review 81, May-June 2013

Hung Ho-fung


It was perhaps predictable that China’s initial sharp rebound from the global financial crisis would serve to entrench widespread perceptions that the prc represents an alternative and, on some readings, superior model of capitalist development. [1] Michael Pettis, The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy, Princeton University Press: Princeton 2013, $29.95, hardback 216 pp, 978 0 691 15868 6 Desperate pleas by Hillary Clinton and Tim Geithner for Beijing to continue its purchase of us Treasuries in the immediate aftermath of the 2008 meltdown seemed to confirm that China was indeed displacing the us, the alleged culprit of the crisis, and becoming a new centre of the global economy. Yet the celebrations of China’s rise at the expense of the us evoked more sceptical responses too. Michael Pettis’s provocative and well-informed new book, The Great Rebalancing, presents a more critical view. It contends that countries that run a persistent trade surplus, like China, are at least as responsible for the global financial crisis as those running deficits, like the us. In his view, the outcome of the crisis will put an end to the ‘economic miracles’ of the surplus countries and may lead them into Japan-style lost decades. The only way out would require a profound rebalancing of the surplus countries’ economies. I will argue that a third scenario could be derived from the book’s analysis, beyond Pettis’s alternatives of a prolonged, deepening crisis or smooth, coordinated rebalancing. But first let us examine The Great Rebalancing’s account.

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Ho-fung Hung, ‘China’s Rise Stalled?’, NLR 81: £3

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