fdi inflows went to developing and transition economies. more specifically, fdi inflows to non - japan asia increased from less than 7 % of world inflows in the 1970s to around 19 % in the 1990s. in the 1970s, fdi inflows to china were a trickle that barely registered. but by the 1990s, these flows had grown significantly, representing ( on average ) 7. 7 % of all global fdi flows. fdi outflows from non - japan asia also rose substantially over the same period : on average they represented 9 % of world outflows in the 1990s, compared with less than 0. 5 % in the 1970s. overall, we can certainly conclude that the euro area and china have become key economic partners. such interdependence is likely to continue to strengthen to the mutual benefit of both regions. the increase in trade integration and capital mobility with emerging asia – and china in particular – constitutes an opportunity, but also a challenge, for the euro area. beyond the short term, the international competitive pressures exerted on the euro area reflect structural factors, and notably strong productivity growth, which are most likely to be favourable to the european economy over the long term. a deepening in the integration processes of both manufacturing and services industries offers the prospects of significant gains at the economy - wide level. europe should indeed benefit in terms of lower prices for firms and consumers, enhanced trading volumes and potentially higher levels of productivity and growth. that said, the necessary adjustments in the short term can be controversial : you are probably aware of the debates in europe on the dislocation of manufacturing and pressures on labour markets. and i will frankly admit that sino - european economic relations, too, have occasionally experienced some tensions in this respect. last year, for instance, the expiration of textile quotas under the multifibre agreement raised concerns that rapidly growing imports of chinese textiles would put a severe strain on european textile manufacturers. however, china and the european union reached an agreement last september, regarded by both partners as a “ win - win ” outcome, which that, with mutual trust and understanding, tensions can be overcome. we, at the ecb, strongly believe that avoiding protectionism is essential for global prosperity, a sentiment which we share with many other central banks around the world. in any event, the implications of global trade integration for european labour markets and competitiveness are not necessarily exclusively related to china and emerging asia, but also to

be sure about the precise timing or the size of the adjustment. as i previously emphasised, external imbalances could persist for a fairly long period, and the prospect of a rapid adjustment is not imminent. the main concern is that a purely market - determined adjustment might turn out to be abrupt, with a potentially adverse impact on global economic growth and financial stability. what can be done, then, to avoid this? global challenges require global answers. each of us must play his part to ensure an orderly adjustment. industrial countries, in particular, can make a key contribution. in the united states, this contribution can come from higher national savings, including from further fiscal consolidation. moreover, the low level of private savings in the united states is a concern and needs to be addressed. as regards europe, our contribution should come from further structural reforms aimed at increasing productivity growth and market efficiency through more competition and innovation. such reforms will help stimulate economic activity and raise growth potential. furthermore, such reforms, by improving the functioning of markets, can be expected also to increase the flexibility of the european economies through greater reliance on market mechanisms, and thus enhance our economies ’ resilience to shocks. this would also prove beneficial when current account imbalances begin to unwind. in this joint effort to avoid a disorderly adjustment of existing current account imbalances, what role does emerging asia play? the reduction of global imbalances in an orderly manner is a key international policy priority. emerging asian countries – and especially china – have become, over the past decade, major economic players at the global level. this greater weight and influence in the world economy also entail a greater responsibility to assess the global implications of national economic policies. as i have already stressed, this is what the euro area and the united states also need to do so as to facilitate a smooth adjustment of global imbalances. the development of the chinese economy and its growing trade surplus have been spectacular. they reflect the international competitiveness and dynamism of your economy and the confidence which international investors have in its future. they have been accompanied by the accumulation of foreign exchange reserves at a pace and magnitude almost unprecedented in history. but, as walter benjamin, the german philosopher, once said about happiness, could this be “ too much of a good thing ”? this depends on the underlying causes of reserve accumulation and on the potential risks to the sustainability of the performance of the domestic and world economies. we in europe are confident that the chinese