China-Japan-United States Integration amid Global Rebalancing: A Computable General Equilibrium Analysis

Using a global general equilibrium trade model, the paper assesses the long-term implications of global rebalancing for Asian economies and explores the benefits of ChinaJapan-US integration. The analysis suggests that consumption evaporation and growth slowdown in the US and the consequent its current account correction would force China, Japan and other East Asian economies to undergo substantial structural adjustment. A combination of domestic reform aimed at boosting services 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 CGE analysis suggests that China and Japan need to strengthen their economic ties with the US while at the same time bringing in other East Asia economies into this integration process. JEL Classification: C68, F15