>>"There is a myth of mutual dependence: China needs to export goods to the US, which needs China’s money to finance its deficit. <<
This is only a relative new phenomenon. China has had an average growth rate of 6% even since 1950. China has both market and enough capital to do it themselves, believe it or not. China only starts to have big budget deficit since late 1990, in order to keep the promise NOT to devalue RMB after the Asian currency crisis. Before that, China was doing ok without much of the deficit.
>>If its government is going to lend money, why not finance its own development? Why not fund increased consumption at home, rather than that of the richest country in the world, to pay for a tax cut for the richest people in the richest country, or to fight a war which most view as anathema?<<
Exactly. The road China has taken, especially since 2001 after joining WTO, is a very stupid, unsustainable road for both China and the world. That said, China has realized this, and is making great effort trying to change that, and stimulate the domestic consumption. The only problem is that they have stopped investing enough in their own R&D pretty much in the last 25 years, so if they were completely open the market now, it will only become the LARGEST colony in the world!
Thanks for the article. I will read it. |
