As China's major markets in the developed world continue to struggle, the imperatives of a consumer-led rebalancing of the Chinese economy loom all the more urgent. Just as the export-led Chinese growth miracle was the major beneficiary of globalization, a Japanese-like secular stagnation of global trade — with global exports flattening out at around 32 percent of world GDP since 2008 — requires China to shift its support from external to internal demand.
There is no quick fix for the globalization of secular stagnation. Japan is the template, and it's well into its third lost decade. Yet there is still great denial elsewhere in the world over the main lessons of Japan. Policymakers and politicians — to say nothing of workers and their families — are paying a steep price for reckless economic management.
Only nations that face up to the heavy lifting of rebalancing and structural change will come out in better shape, with the wherewithal and resilience to withstand the inevitable pressures of the next crisis. For the United States, that means boosting its long-term saving; for Europe, the focus must be on banking reform and fiscal coordination; and for China, a more robust safety net is needed to covert excess saving into more active consumerism. And in Japan, the petri dish of secular stagnation, the imperatives of productivity enhancement for a rapidly aging society have never been greater.