We need to avoid this situation with our best efforts. A variation of this scenario may be that, inflation in China  BIS Review 85/2009  3  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.