Posts Tagged ‘China’s economy’

China’s debt threatens its economic miracle

January 11, 2016

asian-debt-has-rocketed-since-the-crisis-while-the-us-has-paid-down-its-debts-as-a-percentage-of-gdp

I read a couple of articles the other day about how China’s amazing economic growth may hit a wall because of overhanging debt.

Countries get in trouble when the overall debt—governmental, individual, business and financial—increases at a faster rate that the output of goods and services (GDP).

What this means in the short run is a transfer of wealth from taxpayers and workers to holders of financial assets.  What this means if it goes on long enough is a financial crisis.

As economic Michael Hudson wrote: Debt that can’t be paid, won’t be.

The point of about debt is that no matter how rich you are, you can pile up more debt that you can pay.  And no matter how large and strong a nation’s economy, the economy can pile up more debt than can be paid.

The United States in the 1920s is an example.  The USA had the world’s strongest manufacturing economy.  It had a large domestic market and strong exports.  Yet it took more than 10 years to fully recover from the financial crash of 1929.

China has many more governmental powers to head off a crash than the U.S. government did back then.  The question is how they will be used.  Propping up failed companies and financial institutions does not solve the underlying problem.

The world as a whole is in the same situation, so it is not as if global economic growth will solve China’s debt problem—or America’s.

LINKS

China’s $28 Trillion Problem: the dark side of China’s debt by Mike Bird and Jim Edwards for Business Insider.

How China Accumulated $28 Trillion in Debt in Such a Short Time by Jim Edwards for Business Insider.

The $26 trillion dollar debt problem that is crushing competitiveness in China by Nick Edwards for the South China Morning Post.

Is the Chinese Economy Really in Trouble? by Eamonn Fingleton for The Unz Review.  The case for not selling China short.

Heed the fears of the financial markets by Lawrence Summers for the Financial Times.

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China overtakes US as world’s biggest economy

October 9, 2015

panda eagleThe World Bank has noted that China has quietly overtaken the United States as the world’s largest economy.

Washington is responding to this in exactly the wrong way—by trying to checkmate China’s power rather than rebuilding the sources of American power.

China already led the United States in a number of important respects.  According to the CIA World Factbook, it exceeds the United States in industrial output, in agricultural output and in electricity production.

While China had a $260 billion trade surplus in 2013, the USA has a $698 billion trade deficit.

It is true that while the Chinese nation is rich, the Chinese people are still poor compared to Americans—not just in the amount of stuff they own, but in terms of infant mortality, life expectancy, literacy and access to public water and sewerage systems.

Inequality and concentration of wealth are just as great in China as they are in the United States.  China is the world’s largest polluter overall, although the USA is the largest on a per-capita basis.  Interestingly China has a lower birth rate and population growth rate than the USA.

But life has been getting better on average for the average Chinese person, while the earning power of the average American has been slipping behind.

The United States has the world’s largest and most expensive military, but the Chinese may be a match for the USA in their own backyard—the South China Sea.

Joseph Stiglitz, former chief economist for the World Bank and former chairman of the President’s Council of Economic Advisers, argued in a recent article that the USA still has great residual strength, but American leaders are letting it slip away by concentrating on military dominance and corporate profits at the expense of everything else.

In a full-fledged Cold War between the USA and China, China is in an economic position to do the USA great damage.  China could stop buying U.S. Treasury bonds, for example.

It’s not in the interest of China to wage economic war against the United States.  Both sides would suffer.  American leaders should not push China into a corner and put its leaders in a position in which they think they have no choice.   Instead American leaders should concentrate in reducing US economic vulnerability.

China does have big problems—inequality, pollution, corruption, unrest among workers and among minorities in Xinjiang, Tibet and elsewhere.

Maybe these problems will be fatal, although I doubt it.  But these are not issues the United States can affect one way or the other, or should try to affect.

And if China should start to collapse, history has many examples of declining empires that try to restore internal unity by going to war.  This is not something we Americans should hope for.  Our problems originate at home, not in China.

LINKS

China Has Overtaken the United States as the World’s Largest Economy by Joseph Stiglitz for Vanity Fair.

China vs. United States from the CIA World Factbook.

G-Zero: US-China Relations in the Age of Xi by Peter Lee for China Matters.

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China economic strategy outmatches US military

December 22, 2014

Silk-Road-Map1

China represents an economic challenge to American world power.  The USA is trying to meet that challenge with a military response.  It won’t work.

The United States builds military bases and deploys troops all over the world, while allowing public infrastructure and public services to decline.  China is investing in its manufacturing industry, building infrastructure and expanding its trade to all corners of the world.

trainRoutePROJ-2300Pepe Escobar reported that China now has trains that deliver containerized freight from its Pacific Coast to Madrid.  China plans a network of highways, railroad and oil and gas pipelines that will give it access to all of the interior of Asia and bring to the threshold of Europe and the Middle East.

American spending for military and covert operations drains our national strength.  Chinese spending for construction builds up its national strength.

China has displaced the United States as the world’s largest economy.  It has replaced the United States as the largest trading partner of Australia, India, many countries of Africa and Brazil, Chile and Venezuela. America.

The U.S. government tries to enforce its will on other countries by means of our military and economic clout.  The Chinese government tries to win the friendship of other countries by means of construction projects, increased trade and befriending nations alienated from the USA.

The U.S. government is unequaled in history in its power to spread death and destruction.  The Chinese government cannot and does not compete on that level.  Instead it leverages its power to build—a power we Americans could duplicate if we so desired.

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