Excellent article on China

The long-term economic trajectory of China is of extreme importance, both economically and geopolitically. Here’s a small snippet from a great article:

But it’s a mistake to view China’s growth in terms of whether it can or cannot achieve a particular GDP target. China’s GDP growth is not a measure of the country’s economic output and performance in the same way the statistic is for other major economies. China’s GDP growth target is an input decided by Beijing at the beginning of the year. Its fulfillment depends on the extent to which the economic authorities are able and willing to use the country’s resources and debt capacity to achieve the required amount of economic activity.



There is increasingly a consensus in Beijing that China’s excessive reliance on surging debt in recent years has made the country’s growth model unsustainable. Aside from the economy’s current path, there are only four other paths China can follow, each with its own requirements and constraints.

Some 27 years ago I discussed this with Indian MBA students. It applies equally to India. But I do not know anything about India’s current debt load.

The number of people and the local resources make the creation of a mountain of debt necessary to bring a modern industrial state into being. The problems then arise as the currency devalues and imported resources soar in price relatively speaking. The debt load becomes untenable.

Both India and China according to the deeper thinkers have limited water resources. This is true for much of the world. Only the Russians, Canadians, Americans and some other areas perhaps Brazil have excess water for a highly industrial state. Only the US has the right combination of other important parts to have a full gripe on the industrial output globally. We were entertaining Chinese manufacturing for our own purposes.

How can the US have all this debt then? We were recently at a low for our ratio of manufacturing to GDP. It was sustainable. As the dominant power in so many ways we are regaining manufacturing here in North America. We also have the EU working in tandem playing the long wave game of who controls demand side econ and who controls supply side econ.

All investments in China have become dicey regardless of how well written that paper is.

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How can the US have all this debt then?
Because back in the 80s, the JC’s convinced the unwashed masses that cutting taxes on the rich would also make them rich via “trickle down” supply side economics. Of course, they failed to mention was that what was trickling down wasn’t the wine they were being given, but rather the leftovers after it had passed through their kidneys.



That cut our real GDP growth for four decades and massively upped our federal debt and trade imbalance.

The reason is we have a much longer term higher factory output capacity than anywhere else.