China-Japan-United States integration amid global rebalancing: A computable general equilibrium analysis

Using a global general equilibrium trade model, this paper assesses the long-term implications of global rebalancing for Asian economies and explores the benefits of China-Japan-United States (US) integration. The analysis suggests that consumption evaporation, a growth slowdown in the US, and the consequent current account correction would force China, Japan, and other East Asian economies to undergo substantial structural adjustments. A combination of domestic reform aimed at boosting service sector productivity and external liberalization aimed at fostering broader economic integration will be critical for East Asian economies to facilitate their economic rebalancing and sustained growth. Our global computable general equilibrium (CGE) analysis suggests that China and Japan need to strengthen their economic ties with the US while at the same time bringing other East Asian economies into this integration process.