Since the global financial crisis in March 2007, "global economic imbalance" has undoubtedly been one of the most used words by various authorities. Advanced economies, especially the United States, prefer to use it to explain the root causes of the crisis. By classifying the crisis as imbalances and describing them as "global," they can easily shift the blame for the crisis to other countries, especially developing economies like China. It can be said that the "China responsibility theory" and the "China threat theory" have all received their theoretical support from this concept. Naturally, the relevant departments in China have maintained a high degree of vigilance against this theory. The term is avoided in all public places, especially at international conferences. A friend told me that one of the important tasks of the Chinese government delegation at the G20 summits was to erase this term and related expressions from the communiqué and summit declaration of the meeting. We understand this evasion by the relevant authorities. However, as an economist, I always feel that such avoidance seems to be a snake shadow, and even close to stealing the bell. To be fair, on the one hand, apart from imbalances, it seems difficult to find a more appropriate source of the crisis; On the other hand, acknowledging imbalance as the root cause in no way means that we accept the "troubled waters" "brought in" by certain countries, and that it is our responsibility to admit imbalance. On the contrary, by carefully studying the problem of imbalances, we can deeply reveal the facts of imbalances caused by certain developed countries and triggered global crises at the international level; At home, it will also help to have a clearer understanding of the profound reasons for our biased development path, economic structural imbalance and difficulty in adjusting for many years. In early 2009, I attended a symposium of global economists in London, co-chaired by Premier Wen Jiabao and then-British Prime Minister Tony Blair at 10 Downing Street. More than 20 of the world's biggest economists, including Stiglitz, attended the meeting. I am the only Chinese scholar. I was one of five economists who spoke at the symposium. After reporting to and agreeing to the Prime Minister, I devoted my views on global imbalances at the meeting to four main points: First, imbalances, although they have only attracted attention in recent years, have existed as a concomitant of globalization since the establishment of the Bretton Woods institutions. Second, observing the global economic development since the establishment of the Bretton Woods system, we can clearly see that the United States, as the only superpower, has always been on the side of the imbalance deficit; On the side of the imbalanced surplus, the changing roles include Germany and Japan, which since the 70s have been joined by the Asian "Four Tigers", then the Asian "Four Tigers", and then China and the oil exporting countries. So if global imbalances are at the root of this crisis, the most important one is in the United States. Third, in a globalized world, if it is called a global imbalance, the domestic economies of all countries in the world must also be unbalanced. Therefore, the essence of overcoming the crisis and returning the economy to normal track lies in the efforts of all countries in the world to adjust their domestic economic development patterns and economic structures; Since the current globalization is dominated by advanced economies, it is clear that they bear the most important leading responsibility. Fourth, since the end of the 20th century, the Chinese government has put forward the strategic goals of transforming the mode of economic development, adjusting the domestic economic structure, and implementing scientific development, striving to reduce the excessive dependence of economic growth on external demand and domestic investment. This is a practical step towards achieving a "rebalance" of the global economy. Judging from the comments made at the meeting and after the meeting, my views were widely respected by the participants. Since that conference, the issue of global imbalances and rebalancing has become one of my research priorities. The above four points constitute the main points of this book. Although the concepts of equilibrium and balance imbalance and rebalancing are always talked about by Western politicians, the specific meaning of "balance" is always vague. In order to deeply explore such a major issue in theory and practice, we cannot fail to first make some scrutiny of the meaning of "balance." The "balance" involved in imbalance and rebalancing mainly has two meanings: equilibrium and balance. Balance is a widely used concept. According to the Modern Chinese Dictionary, it refers to "opposing aspects equal or offset in quantity and quality." The term "equilibrium" comes from physics and refers to the fact that an object is left in a state of relative rest as a result of being subjected to two forces of the same magnitude but acting on opposite effects. Extended to economics, equilibrium means that there are two opposite forces in the market, demand and supply, and when demand is exactly equal to supply, the market will be in an equilibrium state. Going further, there are two situations in what economics calls equilibrium: one is the Walras equilibrium, which emphasizes the equality of market supply and demand, and then emphasizes market clearance. The other is non-Walras equilibrium. It emphasizes that the price mechanism does not play the role of clearing the market, and the market equilibrium is often non-Walrasian, that is, supply and demand are not necessarily equal, but there is a relatively stable trend. Obviously, compared with the concept of Walras equilibrium with equal supply and demand, non-Walras equilibrium is a broad equilibrium concept, which means that the variables in the system are adjusted and no longer have a tendency to change. Non-Walras equilibrium can also be further extended, that is, when there is an external force that deviates the equilibrium state from the equilibrium point, there is still an inherent tendency to return the economy to the equilibrium state. This is a stable equilibrium. On the contrary, if the economy can no longer return to equilibrium when external forces deviate the equilibrium state from the equilibrium point, it is an unstable equilibrium. Obviously, in economics, equilibrium and equilibrium are two words with completely different meanings. Equilibrium is standard economic terminology and has always been an important concept discussed by economists. Balance is relatively poor and lacks a very strict definition, and in many cases balance is also used to refer to balances, which refer to situations where supply and demand, assets and liabilities, etc. are exactly the same size. The "balance" in the global imbalance that we are talking about is clearly out of equilibrium, because we are not particularly concerned with whether there is a positive or negative balance of payments between countries. On the contrary, the existence of differences between countries is the norm, including the imbalance of trade surpluses and deficits, further the imbalance of the current account, then the imbalance of the balance of payments, and finally the imbalance of global savings and investment, that is, the major developed economies do not save enough, while some emerging economies save "excess", and so on. Our concern is whether this state of disparity can be sustained. "Good imbalance" and "bad imbalance" The difference (deficit or surplus) in a country's foreign trade or balance of payments is the result of the country's global allocation of resources across national borders. Therefore, to judge the economic significance of imbalance, we should analyze it from the perspective of dynamic allocation of resources. Accordingly, we can distinguish between "good imbalances" and "bad imbalances". "Good imbalances" are the optimal decisions of a country to allocate consumption and investment over a longer period of time, for example, a current account deficit can be the optimal result of a dynamic forward-looking savings investment decision. Such imbalances are not only harmless, but also have the effect of increasing social welfare. Specifically, "good imbalance" refers to at least one of the following three conditions: First, the external imbalance and its increase and decrease dynamics coincide with the cyclical changes in the country's economic development stage. Second, the country's economic structure is well-established, enterprises are full of vitality, and the macroeconomy has clear development prospects. Under these conditions, imbalance occurs because of the optimal choice of domestic economic agents, which is bound to lead to good economic results. Third, the term structure and regional structure of foreign investment absorption are good. This is because long-term imbalances in the current account will inevitably have a corresponding impact on capital and financial accounts. If the term structure and regional structure of capital and financial accounts are reasonable, the ability to withstand international capital shocks in the event of worsening current account imbalances (deficits or surpluses) will be greatly enhanced, and the overall balance of payments balance of payments will be stable. "Bad imbalance" refers to the fact that in the process of using domestic and foreign resources, it is difficult for a country to achieve long-term optimal allocation, resulting in the current account imbalance continuing to expand in one direction of deficit or surplus, resulting in distortion of the economic structure and an increase in overall risk. Its main manifestations are: first, the imbalance of the domestic economic structure, that is, the unreasonable industrial structure, the unreasonable sectoral structure, and the failure of timely adjustment of export-oriented strategies; Second, the financial structure is imperfect, including unreasonable saving behavior, improper lending activities, lack of financial supervision, and excessive valuation of local currency; Third, the frequent flow of capital leads to an increase in external risks, and makes the existing unreasonable external debt structure more distorted in terms of currency and maturity matching, and foreign exchange reserves are insufficient or excessively increased. It should be noted that a surplus does not necessarily mean a "good imbalance", just as a deficit does not necessarily mean a "bad imbalance". Because the emergence of surpluses and deficits means that it is difficult for a country to achieve effective allocation of resources within its own scope, and must rely on the international market to balance, therefore, the level of cross-border allocation capacity is the determining factor that determines the imbalance. In addition, imbalances also imply long-term unidirectional international capital flows between capital and financial projects, which will have a lasting impact on the domestic financial system. If the domestic financial market is not efficient, this sustained shock will adversely affect the domestic real economy through various markets such as exchange rates, interest rates, international reserves, credit, bonds, etc. At the same time, in the long-term face of a trend, domestic monetary policy is in fact in a situation of "kidnapping". Without a well-functioning monetary policy structure and an experienced monetary authority, monetary policy will continue to be less effective. The sustainability of imbalances Since we discuss imbalances and rebalancing from the concept of equilibrium, the sustainability of imbalances is a central issue. In fact, the "good imbalance" mentioned above is a sustainable imbalance, because the real economy of the country in the imbalance state is healthy, the micro subjects are full of vitality, and the development prospects are clear. In essence, global economic imbalances are real economic phenomena. However, without the intervention of money, no imbalances can occur in a "pure" real economy. Because the "barter" method of exchange itself does not leave any room for the occurrence of trade balances. The intervention of factors in the international monetary system not only makes imbalances possible, but also highly complicates the problem of global imbalances. If countries in deficit in global imbalances can use their own currencies to settle and pay, imbalances are sustainable to a considerable extent and for a considerable period of time. In this way, the debate over global imbalances focuses not on the causes and magnitude of them, etc., but on whether they are sustainable: if the world still accepts deficit countries to pay for deficits in their own currencies, imbalances are sustainable; Conversely, imbalances can trigger a global economic crisis. Judging by the history of the Bretton Woods system, we can roughly grasp the trajectory of this shift from sustainable to unsustainable imbalance. From the very beginning, the economic world covered by the Bretton Woods system was an unbalanced world. The basic pattern at the beginning was that the U.S. trade surplus and the trade deficit of other countries corresponded to each other and persisted for a long time. In 1960, marked by the fact that the external debt of the United States exceeded its gold reserves, the pattern of world economic imbalance in Bretton Woods began to change into a trade deficit in the United States corresponding to the trade surplus of other countries with the United States, and it intensified. However, this imbalance remained sustainable until the end of the 60s of the 20th century. This is because the dollar is at the heart of the Bretton Woods system, so the United States has the privilege of issuing its own currency to cover the current account balance – and the world must accept the dollar whether it is welcomed or not. The Nixon shock of 1971 was a turning point for unsustainable efforts. Since then, soaring domestic prices in the United States and the collapse of the dollar's external value have made both the United States and the rest of the world feel that maintaining the dollar standard is not worth the cost, leading to the global financial crisis that lasted for nearly a decade and the final collapse of the Bretton Woods system. However, the story of the dollar is not over. After the end of the Bretton Woods system as a system, the core position of the US dollar as an international reserve currency was severely challenged by a variety of emerging reserve currencies represented by the euro, but the rise of Asian countries objectively weakened this challenge. Since the vast majority of Asian countries' currencies remain closely linked to the US dollar, and many countries even implement a fixed exchange rate system pegged to the US dollar, the rise of the region as the new "periphery" of the US dollar has in fact rebuilt the international monetary system centered on the US dollar and strengthened the hegemony of the US dollar. The central position of the US dollar in the international monetary system has been further consolidated by the "drastic changes" in the former Soviet Union and Eastern European countries. Before the 90s, the Soviet bloc in Eastern Europe effectively formed an international monetary system parallel to the Bretton Woods system, the key currency of which was the ruble. After the drastic changes in the Soviet Union and Eastern Europe, all countries in the bloc implemented a market economy, and their currencies invariably adopted the US dollar as the new suzerainty. The collective "surrender" of such a large economy undoubtedly provides new support for the dollar's monetary centrality. These developments have led some researchers to refer to the post-Jamaica international monetary system as "Bretton Woods II". We believe that if the United States still enjoys the privilege of issuing major reserve currencies, it is certainly not impossible to call it "Bretton Woods II", but in terms of the international responsibility of the United States within the system, systems I and II are very different. Today, the United States has no constraints and pressures to take responsibility for global economic rebalancing and global economic development, let alone to pay adjustment costs for rebalancing the global economy. We believe that this complete separation of rights and responsibilities constitutes the basic contradiction of today's international monetary system. This allows U.S. monetary policy to be unfettered and based solely on its domestic goals, regardless of the floods of other countries. It is precisely because of this fundamental contradiction that reform of the international monetary system has become the key to rebalancing the global economy. Striving to achieve rebalancing is naturally the number one task in today's world, because the global financial crisis, which began in 2007 and is still raging, was triggered by global imbalances. If the general meaning of the crisis is "out of the normal track", then the so-called recovery of the crisis may have two prospects: one is to return to the old track; The second is to find a different way. Small-scale and superficial crises have undergone a period of turmoil, and after the factors that led to the derailment have been repaired or corrected, they usually return to the original track and continue to move forward; And if the crisis touches on the institutional mechanisms at a deep level, and new powerful factors intervene in the operation of the economy, the process of recovery will embark on a new path. The crisis is clearly the latter, because the global economy has undergone two important trend shifts since the crisis, which could make the crisis the beginning of a new global landscape. First, it occurs in the real economy. Since the late 80s of the 20th century, the incremental contribution of emerging economies to global output has been higher than that of advanced economies. After the crisis, on the one hand, developed economies have been in a long-term downturn; On the other hand, the sustained high growth of emerging economies has become an irreversible long-term trend. In this historical process, emerging economies will gradually play a leading role in global development, and the old model of globalization, which is completely dominated by developed economies, will be changed. Second, it happens in the financial field. Capitalist global economic crises are always accompanied by financial crises, and most of the historical global financial crises have been characterized by debt crises in developing countries and emerging market economies. Therefore, the recovery from the crisis means a global debt restructuring, and each restructuring has further consolidated and strengthened the hegemony of developed economies in the international financial arena. This time is completely different. Caught in the debt crisis today are those advanced economies that hold the right to issue international reserve currencies and make international rules. They are haunted by the demons they have called out, and cannot be freed without the help of emerging economies, so new international coordination mechanisms such as the G20 have emerged. Naturally, the recovery of the crisis will, on the one hand, enhance the discourse power and influence of emerging economies in the international financial field, and promote the further development of the international reserve monetary system in the direction of diversification; On the other hand, it means that the decision-making power of advanced economies in international financial rule-making has gradually weakened. It is based on the above significance that a new pattern of the global economy has begun to brew. It is precisely in this trend shift that new opportunities for the re-establishment of a new equilibrium and China's development have been created. First of all, the current world economy has entered a period of structural adjustment and industrial transformation, which will help China cultivate "new advantages in development" and "seize the commanding heights of future development strategy". Second, with the global "rising strength of emerging market countries" and the world economy in a "period of governance mechanism change", China can strive to develop and strengthen itself on the one hand, and enhance its ability to participate in global governance on the other hand. If global industrial transformation, structural adjustment and even governance change are basically once in decades and have become a normal pattern of cyclical changes in the world economy, then emerging economies can truly catch up with developed economies in economic aggregate, but it is a new change and new opportunity since the industrial revolution. For China, it is more likely to be a once-in-a-millennium opportunity. However, whether we can seize such an opportunity to establish ourselves in the process of achieving a new global equilibrium depends on whether our development model can be successfully transformed, whether our economic structure can be effectively adjusted, whether our economic efficiency can be continuously improved, and whether our quality can be effectively improved. This is the real challenge we face. Finally, I would like to express special thanks to Tang Duoduo, Li Cheng, Chang Xin, Wang Jia, and Kuang Keke for their contributions in the formation of this book, and Zhao Jianying, president and editor-in-chief of China Social Sciences Press, and other comrades of the publishing house for their hard work in publishing this book.（AI翻译）