China Shock 2.0 may sow the seeds of the next crisis

China’s soaring exports are widening global trade imbalances in ways that echo the run-up to the Global Financial Crisis. History suggests that at some point these must narrow. This could happen in several ways: the least painful would be through coordinated policy adjustment between surplus and deficit countries; the most painful would be via a crisis in deficit countries, notably the US. We expect the imbalances to persist over the next few years but, unless governments embrace changes in policy, their continued widening will increasingly make crisis the most likely route to adjustment. 

This report is part of our series on China Shock 2.0. Explore the series and follow the latest publications on this dedicated page.