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Measured action needed to address US debt issue (2)

By Shen Dingli (Global Times)

10:16, October 20, 2011

Second, the US budgetary pattern could change. In terms of spending, the US war on Iraq has been wasteful, and if it were to withdraw, it would squander no more money on this disaster. The same would be true of an exit from Afghanistan.

Third, though the US is facing a crisis of paying its debt, it has more than sufficient assets at its disposal to ensure that it will not go bankrupt.

China is a success on account of its largely balanced and expanding economy. However, China's export-led economy depends heavily on the US, as a customer, investor and provider of technology. In return, China has provided the US with cheap labor and a source of credit.

Such interdependence is fragile. If the US is unable to sustain its level of buying, the health of China's economy will be put in jeopardy. As such, China has to seek a more balanced alternative.

Keeping both Chinese and American citizens in work so they can continue buying goods is the ultimate solution. While manufacturing for export is a mainstay of China's economy, the country should also stimulate domestic demand and import more from the US. This will not only help provide jobs in America, but also serve to balance China-US bilateral trade.

The author is a professor and executive dean of Institute of International Studies, and director of the Center for American Studies, at Fudan University. [email protected]

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