You know, as I read Robert Samuelson’s column musing over whether China’s economy will crash or have a “soft landing”:
It now turns out that the Chinese — like the Japanese — are not infallible. Indeed, after allowing for differences in historical circumstances, China and Japan seem to have committed similar mistakes. Japan had relied on exports and business investment until an appreciating exchange rate in the mid-1980s undermined the price competitiveness of its exports. It then adopted an easy monetary policy, which led to bubbles in real estate and stock prices. Similarly, China depended on export-led growth and, when the financial crisis dampened trade, switched to a massive expansion of credit to finance infrastructure projects and more investment in heavy industry.
it occurred to me that, more than anything else, it illustrates the inability of our math-phobic opinion makers in dealing with large numbers. So, for example, an increase in 7.2 million non-farm jobs over six months sounds pretty impressive. But China’s total labor force is estimated to be around 800 million people so as a percentage that’s about .9%. Relative to total employment the U. S. economy added that many non-farm jobs in the month of August.
China faces some great challenges in the years ahead. A decade ago I wrote optimistically about the country’s ability to deal with them effectively. China’s leaders have completely failed to do so. I’ll leave the whys to someone else but every one of China’s greatest challenges, e.g. demography, environmental problems, is worse than it was a decade ago. They’re not moving in the right direction.
Newsflash: The US and European economies are credit based. The Europeans are so bad off, they are beginning to opine about outlawing cash.
China is a different beast. Internally, it will come down to bread and circuses or the barrel of a gun. The Chinese citizens will decide which they would prefer. Externally, who knows. The US could be a winner or loser.