There’s a growing consensus that the U.S. needs to export more, and import less.  The basic argument here is that huge recent imbalances between the consumption-mad U.S. on the one side and exporting China, Japan, Germany, and the Persian Gulf on the other can’t go on and that we need to “rebalance” the global economy. And it sounds good, especially when Larry Summers says it. The only problem is, it’s not clear to whom we would do all this new exporting. After all, if every other nation adopts the same goal, how would this massive reset really work? No wonder there’s a good bit of head-scratching and wondering about this underway.

Yet today, a good page 1 story in the Wall Street Journal sheds some light on this critical question for metropolitan economies, and suggests that one answer may well be China--within reason.

According to Andrew Batson’s report “China Inc. Looks Homeward as U.S. Shoppers Turn Frugal,” plummeting U.S. consumption is forcing more Chinese manufacturers---such as the bike manufacturer Tandem Industries--to turn to a new market: the Chinese themselves. Tandem, to take the Journal’s example, has seen its American sales tumble by 40 percent or more since last year’s credit panic, and so the company has out of necessity begun to offer its bikes in its home province, Guandong, under its own brand and at its own stores. And yet, the move appears to grow out of more than necessity, and involves opportunity too, because Chinese spending is holding up quite well, partly because of the government’s stimulus spending, but also because spending by Chinese urban households has been growing has been growing due to the nation’s economic run-up. All of which gives a little more reality to the “reset” debate. Just as depressed consumption in the U.S. is pushing China to become more inward-focused, perhaps the new dynamics will allow the U.S. to become little more outward-oriented and export more to China and other developing nations.

And yet, how this will work still seems hard to understand. For one thing, domestic demand itself could suffer in China if its exports decline, since so many Chinese jobs are linked to export industries. In addition, as the Journal points out, Chinese consumers simply don’t have the wherewithal to drive the global economy in the same way big-spending New Yorkers or Angelenos do. Note that the shop-til-they-drop consumers of the U.S. and Europe each spend more than $9.5 trillion a year into the global economy, even now. China’s much poorer households, by contrast, spent in aggregate just $1.5 trillion last year. That makes it doubtful even such a huge and growing country can replace the U.S. and Europe as an engine of global growth.  

Given that, notwithstanding Batson’s good story, I’m still not quite getting how the big reset will really play out.