Towards a 'big deal': Rebalancing the China-US economic axis
According to U.S. Treasury Secretary Scott Bessent there is a potential for a "big deal" with China, which would involve rebalancing and shifting China's economy more towards consumption and the U.S. economy more towards industry, as he stated on Wednesday.
Bessent discussed the changes desired by the U.S. during a talk at the Institute of International Finance in Washington, D.C. regarding his vision of a new economic order.
As he stated, China and its export-driven economy need to change, otherwise, the imbalance in the global economy will worsen.
China’s current economic model is built on exporting its way out of its economic troubles. It’s an unsustainable model that is not only harming China but the entire world. China needs to change. The country knows it needs to change. Everyone knows it needs to change. And we want to help it change—because we need rebalancing too, he said.
Bessent later compared China's current situation to Japan's in the early 1990s, when, after decades of export-driven growth, that country experienced two decades of stagnation and only revived economically after Shinzo Abe's reforms. He assessed that Chinese policymakers know they need to change the country's economic model, but sometimes it takes an "external impulse."
He presented an alternative scenario involving an economic agreement between the U.S. and China. "Treasury Secretary Scott Bessent on Wednesday said 'there is an opportunity for a big deal here' on trade issues between the United States and China. If they want to rebalance, let’s do it together,' Bessent said during an appearance at the Institute of International Finance in Washington, D.C.," as CNBC reports.
Minister talks about "absurd classification of China"
The minister also spoke about, among other things, the changes he deems necessary in global institutions, including the World Bank and the International Monetary Fund. He criticised them for straying from their original mission of reducing global poverty and for lending to more developed countries that don't need it. He also called for an end to the "absurd" classification of China as a developing, rather than developed, economy.
After his appearance, on the sidelines of the spring meetings of the International Monetary Fund and the World Bank, the U.S. Treasury Secretary said that the current level of tariffs set by the U.S. and China (52 percent for Chinese goods and 48 percent for U.S. goods) is too high and effectively amounts to an embargo. However, he stated that to initiate talks with Beijing, mutual tariff reductions are necessary.
