Timothy Birdnow

In a discussion about the strength of the Chinese economy and it's debt problems contributor Bill and I had a difference of opinion.

Bill said:

Hold on to that comforting delusion as long as you can. China's debt is internal, controlled by its government, mostly owed to its government, and will never be allowed (by the government) to implode the economy.

Tim replies:

Doesn't matter Bill; they have to create a LOT of jobs every month - 15 million a year minimum - to keep pace with the growing population https://www.aljazeera.com/economy/2017/10/22/china-needs-to-create-15-million-jobs-every-year/, and internal debt is perhaps not as bad as foreign debt but in the end it cannibalizes the economy. It's exactly what QE did to our economy that caused the runaway inflation. And this is a command economy where government plans most things out.

There are a lot of warning signs for China's deteriorating economic conditions. They had a real estate crash, and that isn't even done yet. And they trade primarily with the U.S., and without foreign trade their economy - which is not diverse enough to sustain them - will fail.

You have to remember this is still a communist country, and like all communist countries the government controls most aspects of the economy. It's a fascist economy now, but the corporations are all government owned or owned by Party members. This sort of economy cannot last for any great length of time.

They have primarily done well because the U.S. kowtowed to them for the cheap manufacturing goods, and we stopped manufacturing in the U.S. If we find another supplies (say, India, or Brazil) the Chinese will have nowhere to go. We import $450 billion in goods and services from China annually as of 2021. We exported $164.9 billion. You can see that it would hurt China much more to lose our business than for us to lose theirs.https://ustr.gov/countries-regions/china-mongolia-taiwan/peoples-republic-china

China's debt is 250 times GDP. http://fingfx.thomsonreuters.com/gfx/rngs/CHINA-DEBT-HOUSEHOLD/010030H712Q/index.html#:~:text=How%20bad%20is%20it%3F%20China%E2%80%99s%20debt%20is%20more,leads%20to%20a%20financial%20bust%20and%20economic%20slump.Whether that is internal or not no longer matters at that point.

And China's foreign debt stands at $2.4 trillion. ?https://financeband.com/how-much-does-china-owe-to-us That is not exactly small potatoes. The U.S. owes $4.45 trillion, and we consider ourselves in horrendous debt.

So China owes about half as much as do we in foreign debt. But China's GDP is 8.36 trillion compared to $15.68 trillion for the U.S. https://www.nationmaster.com/country-info/compare/China/United-States/Economy#:~:text=Definitions%20%20%20%20STAT%20%20%20,more%20than%20...%20%2016%20more%20rowsSo their GDP is about half of ours - and their foreign debt is about half of ours. They are in the same boat as are we - but with a lot more hungry mouths to feed.

And while they have an estimated 25 billion barrels of oil in reserve, how long would that last in an industrializing economy?The U.S. has an estimated 264 billioon - over ten times the Chinese reserves.

In the end China MUST trade or collapse. The U.S. could get by with less trade.

For instance, between 2003 and 2017 Chinese imports of food grew from $14 billion to $104.6 billion. Their exports grew from $20.2 billion to $59.6 billion. So China imports more than twice what it exports in terms of food. That is an achilles heel. https://chinapower.csis.org/china-food-security/#:~:text=China%20has%20become%20increasingly%20reliant%20on%20imports%20to,increasingly%20finds%20itself%20running%20a%20food%20trade%20deficit.

The Chinese are increasingly buying U.S. energy sector exports. https://www.eia.gov/todayinenergy/detail.php?id=36632

I'm not the only one saying the Chinese economy is in trouble. It is coming from numerous sources on both sides of the aisle. See https://www.barrons.com/articles/chinas-economy-is-in-trouble-the-ripples-will-hit-the-fed-51655148051 abd https://nationalinterest.org/feature/gordon-chang-chinas-economy-deep-trouble-158011 and https://www.19fortyfive.com/2022/05/the-chinese-economy-is-in-a-death-spiral/ and https://www.wsj.com/articles/slow-meltdown-of-china-economy-evergrande-property-market-collapse-downturn-xi-cewc-11640032283#:~:text=%20China%20is%20experiencing%20a%20slow-motion%20economic%20crisis,up%20to%20the%20task%20of%20managing%20the%20crisis.

And remember Bill, the Chinese aren't known for giving out accurate information when it paints them in a bad light; things are probably far worse than they are telling us.

I said I believe China is a paper tiger largely created by the West's Ruling Class to act as the manufacturing center for a New World Order and to promote profits in investment and act as a counterbalance to American hegemony, and I stick by that claim. If we stop coddling them they will eventually fall.

Oh, did you know that last year we STILL provided foreign aid to China? $28.3 million last year. (Trump had cut that number down from $62 million, but why he didn't cut it entirely is mystifying.)

If China is such an economic powerhouse why does it need U.S. foreign aid?

Posted by: Timothy Birdnow at 08:10 AM | Comments (5) | Add Comment
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