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Europe may not have a current account deficit, but "the West" in its entirety does.  And that means there are limits to how much the West can possibly compensate the Chinese for their loss of trade income, particularly since the only real net value to having a positive current account is to buy things in other countries instead of domestically. Compensation in that case entails giving the Chinese free stuff, and depending on what that stuff is, it might hinder domestic economic development as much as help it, and, because they're not foolish, Chinese authorities know that.  

Also, it makes sense, strategically, for the Chinese to slow their own transition to more costly forms of greener energy as long as they know that others are doing it more quickly and that they can expect lower costs of such transition in the future as technologies and methods become more mature. The problem, of course, is that it creates a prisoner's dilemma situation between the Chinese and already industrialized countries that can jeopardize any progress.

by santiago on Fri Aug 7th, 2009 at 11:58:44 AM EST
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