March 6, 2009

Group of 20 said to rely on China and U.S.

World Bank Group leaders said the United States and China should balance out their economic dysfunctions, which are paradoxically dissimilar.

Referring to the Group of 20 industrialized nations, World Bank Group President Robert Zoellick and its Chief Economist Justin Yifu Lin, in a report published in The Washington Post Friday, said without a strong G-2, the G-20 will disappoint.

The United States, Lin and Zoellick said, must rebalance saving and consumption. It cannot afford a return to the days of maxing out credit cards to finance unfettered consumption. It must regain control over expanding budget deficits, which are driven largely by entitlement spending, the article said.

China, in turn, must extend credit to ordinary people and small and medium-size companies (that) have been subsidizing big corporations and the new rich through low wages and interest rates, Lin and Zoellick wrote.

To achieve its leaders' goal of building a 'harmonious society,' China needs to improve its income distribution, the article said.

The article suggests the countries join forces to prevent a protracted global recession.

To do this the United States must boost savings and investment while China increases consumption, not just capacity, the World Bank experts said.