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‘Stabilization’? Analysts Weigh In As China’s Economy Slows To Crisis-Era Pace
It would be somewhat odd to characterize an uninspiring set of numbers as "Goldilocks", but you coul
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Honestly if China can maneuver through their massive credit bubble and manage a soft landing, they’ll be alright. Retail sales will pick up, their economy will start moving towards being more service oriented, and then become a self-sustaining global engine, less dependent on exports and also the US.
However the odds of a hard landing are elevated, and things could get really bad if that happens.
But I think China has a couple things going for them. As you’ve pointed out, China has many more policy tools at their disposal than the US, allowing them a lot of maneuverability. Another factor that is sometimes overlooked is their central government structure. If things did get bad, I think they could cut the fat and get things moving more effectively than the US.
If things get really bad in the US, at some point the last resort will be to increase taxes significantly. You can imagine how much resistance this would cause. This scenario would then be made immeasurably worse if the world would cut their reliance on USTs. This relationship could conceivably create a kind of feedback loop, where the fiscal situation gets worse, countries buy less treasuries, making the fiscal situation worse still, etc. Obviously this isn’t a real risk, even in the next 30 years, but beyond that who knows. I think we’d see gated cities and people starving before a significant increase in taxes for the wealthy.