The U.S. current account trade deficit for 1996 was a near-record $165 billion. Economists are divided over whether to panic or yawn.

• On the downside, according to some economists, is the reality of our relatively low savings rates even with an aging population -- which requires borrowing from abroad.
• Meanwhile, optimists note that the doubling of the deficit since 1992 has been accompanied by a steady economic advance here -- while Japan and continental Europe have stagnated.
• When one considers the trade deficit in terms of a percentage of national output, it is encouraging to realize that it shrank from 3.6 percent in 1987 to 2.1 percent last year.

Economists point to China as a major factor in the U.S. deficit picture. Our deficit with that country last year was $39 billion -- a fourfold increase in six years.

Asia's low-wage export industries have shifted to the region's low-wage leader, China. Also, the Chinese government has been buying foreign currency at a feverish pace -- driving down its own currency and making Chinese goods more competitive abroad.

China has now amassed a war chest of over $100 billion which economists say should assist it in holding the line against any speculative run on Hong Kong's currency after unification.

Source: Peter Passell, "America's Trade Gap is (1) a Disaster (2) a Sign of Success," New York Times, April 17, 1997.