Book review: Unbalanced - the Codependency of America and China, by Stephen Roach
The United States and China have become the world's ultimate odd couple, thrown together by circumstance but now so destructively co-dependent that neither seems able - or willing - to go it alone.
This is the picture painted by Yale senior fellow and former Morgan Stanley chairman Stephen Roach, who argues that the two largest economies have become so entwined that dangerous short-termism is being mistaken for mutual benefit; unhappy lovers kept together only by a shared fear of being alone.
Roach is well qualified to discuss the issue, having witnessed first-hand China's economic miracle and the Asian financial crisis while at Morgan Stanley in the 1990s. The equation he presents is simple: China is over-reliant on American consumers buying the goods it produces; and the US is over-reliant on cheap Chinese goods and Chinese investment to fund its debt.
It shouldn't take an economist to come up with the solution: China needs to consume more while the US needs to produce more. But there are many political, social and historical barriers that make such a transition easier to present on a spreadsheet than to put into practice.
Roach does an excellent job outlining these barriers. He warns against political posturing on both sides. He is even-handed in his analysis of the pros and cons of the Chinese and American political systems.
This is a topic on which plenty has already been written, but Roach approaches it with academic rigour and a knack for explaining complex ideas in simple terms. There is a passage outlining a hypothetical trade war which could work as the backdrop to a financial thriller.
There is plenty of historical context, too. The current economic climate is ominously compared with that of the pre-Depression era.
Roach is at times guilty of writing with the detached authority that comes from a career in finance. It is easy to fall into the trap of forgetting real-world consequences when discussing economics on a global scale, and assertions that America as a nation must save more appears to pay little attention to the people that such cut-backs will hurt the most.
But this is still a thorough overview of the economics behind the 21st century's defining relationship. "China and America - or is it China versus America?" Roach asks in Unbalanced.
There's no need to reiterate how important it is to find a peaceful answer to this question, and unbalanced may just be a good starting point for China and the US to begin building a relationship which is stable, mutually prosperous and sustainable - even if that means just being friends.
Luncheon discussion with Roach and Asia editor of The Financial Times David Pilling, Thur, 12.30pm-2pm, Asia Society, 9 Justice Drive, Admiralty. Inquiries:2103 9511