Global payments imbalances are back in the spotlight. As the global financial crisis recedes, international policy debates are again focusing on the large and persistent U.S. current account deficit and China's huge surplus. It has been the cause of heated overnight debates at G-20 summits in Washington, Toronto and Seoul—and mostly likely will again in Cannes in November this year. Some point to the imbalance as the culprit behind the crisis.

While the precise cause of the problem remains a matter of debate, the good news is that everyone finally agrees that it must be resolved if the world economy is to maintain sustainable growth. The current mantra is to let the Chinese yuan appreciate rapidly along with a rise in its domestic expenditures and to get the U.S. fiscal house in order. That should do the trick, the argument goes.

Easier said than done, however. While it has to be done in the long run, a hasty shift would rattle global economic stability. Cutting the U.S. deficit too fast would disrupt an already weak recovery in America. Appreciating the yuan too rapidly would cool the export-led Chinese economy disproportionately, disrupting its own adjustment process. Then too, a rapidly depreciating dollar could destabilize international financial markets, as it remains the primary reserve currency worldwide.

As those changes unfold, the rest of Asia cannot afford to sit idly by. Simply because the problem originates bilaterally does not mean the solution has to be bilateral. A multilateral approach would be far better.

Emerging markets in Asia and Latin America should play a key role in any effort at global rebalancing. These economies showed their pluck in the recent downturn when they helped lead the world out of its slowdown. They are increasingly integrated into global trade flows, including trade and investment that flow back and forth between China and the U.S. Expanding "South-South" economic links, including greater policy coordination, should be an important component of any effort at bilateral rebalancing between the U.S. and China.

To understand why, consider the changes China will need to make as part of rebalancing. To increase private consumption, income from the public sector will need to reach households. Partly this will require privatizing China's massive state-owned enterprises so that Chinese can more directly benefit from corporate growth as shareholders. At the same time, those enterprises will need to become more productive. The scale and pace of privatization are entirely in Beijing's hands. Also China, has to build social safety nets strong enough so people feel comfortable spending more and saving less.

Other countries can help expedite this process by opening up to greater trade and investment. China's own openness to American manufacturers created jobs and growth in China at the same time it made many American companies more profitable (contributing to greater consumption in the U.S.). Now it is time for China to develop similar relationships with other developing economies. Boosting Chinese investment in emerging markets would boost those economies, while also facilitating China's domestic rebalancing by diversifying their investment and increasing productivity of Chinese companies.

This shift is already happening, to an extent. South-South trade and investment is rapidly expanding. Its trade share is up from about 7% of world trade in 1990 to 17% in 2009—with developing Asia accounting for some three-quarters of that amount. China is a counterpart in roughly 40% of these transactions.

However, many structural weaknesses remain. This strengthening was largely the result of the rise of "factory Asia," where developing Asia sourced intermediate goods and parts from other developing countries to assemble them into final goods to be exported to affluent markets in the U.S., Japan and Europe. Growing South-South links do not necessarily translate into greater economic independence. To be a new and autonomous driver of global growth, a better investment and trade environment for industrial migration within the South is needed.

Part of the solution is greater openness to trade. Customs duties in trade between developing countries are still three times higher than those among industrialized countries and South-South free-trade agreements lag behind World Trade Organization rules. Trade agreements under the auspices of the Association of Southeast Asian Nations help address this in the region, but governments need to ensure they abide by all their commitments. Low-income countries in Africa and Asia should also undertake domestic reforms to attract foreign investment from both the U.S. and China.

As for South-South policy coordination, exchange-rate management will be the most important point. China is running a current account surplus with advanced economies, but its trade balance with many emerging economies is in deficit. A coordinated exchange-rate adjustment through regional cooperation will make the realignment of the yuan much easier. This would also help temper the imported inflationary pressures these economies are facing.

The U.S. deficit-China surplus conundrum will not vanish overnight. It will take time for an orderly workout. In the interim, a multilateral approach can help everyone. Together with yuan appreciation and the U.S. fiscal consolidation, South-South cooperation in trade, investment and exchange-rate policy has the potential to smooth the transition toward a more balanced global economy.