have used it earlier this year when speaking at an event hosted by bank negara malaysia. on this graph, china ’ s current account surplus, though large, is just a part of the global total. oil exporters, japan and other asian economies all have a significant share in the global surplus. among the deficit or low saving countries, the share of u. s. deficit is very large. the east and central european countries account for a very small share of the total deficit. other economies do not have a prominent share in global imbalances. in recent years, this matter has received a lot of attentions. the imf ( international monetary fund ) has organized a series of discussions, and the focus has shifted from balance of payments surplus to savings gluts. it is comforting to see that the household savings rate has gone up to almost 7 percent in the u. s. as recently as this last may. whether this is a sustainable long - term trend remains a question for prudent judgment. generally speaking, structural adjustment is never easy. in addition, the u. s. has a problem of public deficit. how the us healthcare reform will unfold, a matter that the international community follows with great interest may shape the future trend of u. s. savings rates. 3. the distribution of savings in china people outside china need a better insight into the high savings rate in china. the general view is that china consumes too little and has to consume more. the following chart shows that the income distribution during china ’ s economic transition has contributed to the savings pattern. the share of china ’ s household savings in gdp has been quite stable. it was 20. 3 percent in 1992 and 20 percent in 2007. though once hitting a low of 17 percent, it basically remains around 20 percent. the share of corporate savings in gdp was 11. 3 percent in 1992, and doubled to 22. 9 percent by 2007. meanwhile, the share of government savings, namely public sector savings in gdp was 4. 4 percent in 1992, and nearly doubled to 8. 1 percent by 2007. given the comparatively small size of the government savings, surging corporate savings played a more important role. high corporate savings in china are closely related to the large rural labor surplus. seeking opportunities to better realize their productivity, surplus rural labor has gradually found jobs in coastal and urban areas, in industrial and the service sectors. this, as matter of fact, is part of the urbanization process

savings rate goes up, and thus the u. s. consumes fewer chinese products. subsequently, china will see greater excess capacity, lower equipment utilization, job losses, and a path for slower gdp growth. we need to avoid this situation with our best efforts. a variation of this scenario may be that, inflation in china causes effective rmb exchange rate movements in real terms and thus resulting in the completion of the adjustment process. a third scenario sees higher household savings rate in the u. s. and moderately stronger consumption in china. also in this scenario, china ’ s investment in urbanization increases. together these will reduce the savings glut and its outflow. we can assume that this leads to rapid developments in urban infrastructure, housing and the service sectors, supporting future consumption and employment. this is another acceptable outcome. but this requires appropriate reform for the modus operandi of investment and for financing instruments to support urbanization. for example, we have been discussing for years whether local governments should be allowed to issue municipal bonds to finance infrastructure projects. in the fourth scenario, though higher u. s. savings rate reduces demand for chinese products, china successfully moves part of its excess capacity, including its manufacturing capacity, to other developing countries through its going global investment strategy. in terms of south - north relations, this will help facilitate industrialization and raise future consumptions in developing countries. this scenario is also a step in the right direction. by then, china ’ s trade surplus will no longer be a major problem. a major test will be whether the u. s. will still run large deficits against other developing countries. in the fifth scenario, the u. s. fails to shore up its aggregate savings rate, its healthcare reform falters, and its public consumption remains high. in contrast, the adjustment efforts in china are successful. part of its excess capacity is relocated to other developing countries, its foreign trade reaches relative equilibrium, or its savings surplus, if any, is diverted to other countries instead of flowing to the u. s. at that time, the u. s. may still run trade deficits and have savings flow problems with vietnam and other developing countries, and oil - producing countries. a sixth scenario is the last thing we want to see. here, all adjustment efforts are made in vain, the economic imbalances persist, and trade protectionism escalates. there may be other scenarios. this list is by no means exhaustive. we may