The US-China power balance, trade and currencies

The BBC produced a nice little graphic this week to go illustrate comparisons between the US and Chinese economies, alongside the talks between President Obama and President Hu Jintao. Relations between the two countries have been strained by issues such as the trade imbalance and China’s growing military might. The figures here give some background to those issues.

They also have a video of an interview with Dambisa Moyo, in which she suggests that protectionism will necessarily be a topic of discussion between the two presidents and, controversially, suggests that such a policy may be the only way for the US to go in the future, with an unemployment rate in December of 9.4%.

On the other hand, Jim O’Neill of Goldman Sachs plays down those risks, suggesting that there is actually a slowdown in China’s trade surplus.

If you want a little more background on the ‘currency wars’ issue, which was a major feature in the G20 talks last November, this article may help explain the link between ‘competitive devaluations’ and global trade imbalances.