China has elevated the reduction of external imbalances to a major national objective in 2007. It intends to boost domestic demand and is committed to moving gradually toward greater exchange rate flexibility.

Policymakers initially resorted to government spending and low interest rates to boost demand. As government debt has ballooned and policy interest rates have hit rock bottom, central banks have focused on increasingly innovative policy to boost demand.

Recent fairly generous wage agreements in Germany will help, but are not enough there is also a need to boost domestic demand. More aggressive liberalization of the bloated banking system, network services (especially in energy and transport), and public procurement may contribute significantly over time to raising domestic investment and incomes.

Other contributory factors were high domestic liquidity and low, albeit gently rising, interest rates, which enhanced domestic demand expansion.

Second, the Chinese production mix does not correspond to domestic demand, and investment in long products has outpaced demand growth.

However, the rapid expansion in domestic demand resulted in remarkable trade deficits.

So far, growth has been driven by a combination of external resources (aid, debt relief, or commodity windfalls) and the removal of some of the worst policy distortions of the past. Domestic productivity has been given a boost by an increase in demand for domestic goods and services (mostly the latter) and more efficient use of resources.

MUNICH With global rebalancing set to be high on the agenda at the next G 7 and G 20 meetings, Germany, with its persistent export surplus, will again come under pressure to boost domestic demand and household consumption. But the German consumer is a sideshow.

The standard way to buffer the effects of austerity is to marry domestic cuts to devaluation of the currency. Devaluation renders exports more competitive, thus substituting external demand for the domestic demand that is being compressed.

To enhance domestic demand, Asia, including China, must reallocate resources and structurally transform the economy. Reinforcing social safety nets, broadening and deepening financial markets, and supporting small and medium size enterprises would also strengthen domestic demand.

Expansion in domestic demand resulted in an increase of 22 per cent in imports.

NEW YORK In a world of weak domestic demand in many advanced economies and emerging markets, policymakers have been tempted to boost economic growth and employment by going for export led growth. This requires a weak currency and conventional and unconventional monetary policies to bring about the required depreciation.

CAMBRIDGE While virtually every country in the world is trying to boost growth, China s government is trying to slow it down to a sustainable level. As China shifts to a more domestic demand driven, services oriented economy, a transition to slower trend growth is both inevitable and desirable.

A reduction of domestic public debt could also help to boost growth by freeing resources for the productive sectors of the economy.

It also means getting the balance between domestic and external demand right, and appreciating the sensitivity of medium and long term growth to the composition (and size) of domestic aggregate demand. Against this background, monetary policymakers must be cautious, because low interest rates can shift the growth model back toward leverage and domestic consumer demand, stalling the structural shift to the tradable side that is underway.

Accumulating excessive debt usually entails moving some part of domestic aggregate demand forward in time, so the exit from that debt must include more savings and diminished demand. The negative shock adversely impacts the non tradable sector, which is large (roughly two thirds of an advanced economy) and wholly dependent on domestic demand.

Germany and the eurozone core were already running large surpluses in the absence of policies to boost domestic demand, those surpluses have simply risen further. Thus, the ECB s monetary policy will take on an increasingly beggar thy neighbor cast, leading to trade and currency tensions with the United States and other trade partners.

Absent a sudden, immediate, and strong boost in US domestic demand that turns into a durable boom with rapid employment growth, probably not. The fall over the past three years in the proportion of the working age population with jobs in America has been the biggest in percentage terms since the Great Depression.

As China satisfied its demand for safe assets, it turned to riskier foreign investments. It began rebalancing its economy from saving to consumption and from exports to domestic demand.

Economically, Japan enjoys a strong production capacity, but its domestic market is relatively limited. In particular, the domestic demand is relatively weak in the context of aging population.

The economy is also set for a boost from surging demand for British goods thanks to the weak pound, which will offset some of the lower consumer spending.

A vicious circle, it seems, is at work. The way to break it, according to Summers, is to sustain monetary stimulus and boost demand aggressively through fiscal policy.

To be sure, one can reasonably argue that austerity in the eurozone has been excessive, and that fiscal deficits should have been much larger to sustain demand. But only governments with access to market finance can use expansionary fiscal policy to boost demand.

Government revenues depend on the value of domestic output, not only consumption. Though lower oil prices depress consumer prices, they should boost production and overall GDP.

Oil windfalls alone are not necessarily responsible for domestic demand, since oil revenue can migrate into foreign asset accumulation.

In the short run, the non tradable sector is, by definition, subject to domestic demand constraints. A shortfall in non tradable demand inevitably limits growth on that side of the economy.

Nonetheless, the European surplus is too large to ignore, and Germany in particular will be asked once more to rebalance its economy toward higher domestic demand, which for many people implies the need for a fiscal boost. But the government is not obliging Finance Minister Wolfgang Schäuble has just presented a balanced budget for 2015 the first since 1969.

The International Monetary Fund and the World Bank can serve as lender of last resort to emerging markets at risk of losing market access, conditional on appropriate policy reforms. And countries, like China, that rely excessively on net exports for growth should accelerate reforms, including more rapid currency appreciation, in order to boost domestic demand and consumption.

In principle, Germany could try to boost domestic demand by leveraging up but, unless the exchange rate adjusts upward to shrink the tradable sector at the margin, doing so would be inflationary. The European Central Bank would then have to intervene to maintain the credibility of its commitment to price stability, which is its primary mandate.

The implementation of integrated programmes should take into account the situation of the industrial sector, which in Sudan was now helping to boost gross domestic product (GDP).

For the energy sector, the common variables used to develop scenarios were population growth, demand, and gross domestic product (GDP).

The growth in domestic investments would not only enhance national wealth, but would also spur the demand for foreign capital and technology in an escalating, mutually reinforcing manner that makes investments demand driven.

It is a challenge for oil exporters among the ESCWA member countries to combine sustainable domestic demand creation with economic diversification.

Domestic demand led growth will be a more reliable strategy than export led growth. That means that countries with a large domestic market and a prosperous middle class will have an important advantage.

But even these measures, which foreign observers have largely overlooked, have failed to boost consumer demand. So what more could the German government do to wean the Germans off their abstemious habits?

Europe s economy grew at an anemic 1.8 annual rate in 2004, and the OECD has recently revised downward its growth forecast for next year, from 2.5 to 1.9 , owing to the rising euro and the fall in exports so far the only driver of the euro area economies. The common wisdom is that to faster European growth requires a boost from domestic demand.

Under two plausible scenarios both concerning China the unwinding of global imbalances could cause regional if not global depression. In the first scenario, China continues to attempt to maintain full employment in Shanghai, Guangzhou, and elsewhere not by stimulating domestic demand but by trying to boost exports further by keeping the renminbi stable against the dollar and falling in value against the euro.

New capacity is mainly planned in developing countries and countries in transition with relatively low production costs and rapidly growing domestic demand.

Continuing economic diversification policies have made it possible for the Gulf Cooperation Council countries to channel oil gains into expanding domestic demand.

Subsidizing labor, by contrast, is a pure injection of liquidity. However, for precisely that reason, an employment subsidy is likely to be more effective in boosting demand, which implies that a smaller injection of this kind is likely to boost demand as much as a larger asset purchase would.

As for fiscal policy, Germany continues to resist a much needed stimulus to boost eurozone demand. And Japan seems to be intent on inflicting on itself a second, growth retarding consumption tax increase.

Growth also accelerated in New Zealand while remaining substantially unchanged in Australia in 2004, supported by buoyant domestic demand and high commodity prices.

It has three primary objectives to identify potential demand among TNCs, to upgrade potential domestic business partners, and to match and monitor operations.

Although the role of monetary policy in demand management is limited when a national currency is pegged to a currency such as the dollar, its indirect effect of creating healthy domestic demand could be observed in 2004.

Moreover, the use of wood by Africa s growing population is causing increasingly rapid deforestation in many countries. There is significant potential domestic demand for coal briquettes to replace wood for cooking and domestic and industrial heating.