Main China - U.S. Economic Dilemmas
The main objective of this paper is to analyze the interdependence between the U.S. and Chinese economies in relation to the world economy. The paper is structured in three main sections. Section I deals with China's fiscal policy (specifically tax structure influence on the East and West parts of the country), its relationship with the GDP structure, and the latent possibility of inflation. Section II is dedicated to foreign trade issues such as the manipulation of the currency, China's dependence on exports, as well as being the main creditor of the U.S. foreign debt, and the largest holder of U.S. reserves in the world. Section III focuses on the current and perspective role that both China and the U.S. may play as engines of the world economy. The main conclusions are mainly related to: a) unemployment in China and budget deficits in the U.S. in the context of the Chinese export-led growth; b) the significance of the emerging halt on market reforms on China's future development; and finally c) the fact that without US FDI and imports it would be difficult for China to get out of the recession given its export-driven GDP structure. (original abstract)
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