
China’s economy is more sustainable precisely because it is deflating its bubbles, while a US economy that continues to rely on an expanding debt bubble can only be headed for a cliff.
Chinese companies are not just leading, they are also innovating faster than their competitors and can dominate the global auto sector in the coming decade. Countries competitive in automotive-making have traditionally become high-income economies. China may well go down that path.
As China holds the line against reviving its bubbles, productivity growth will eventually boost the economy again. In particular, the virtuous economic circle linking China and the rest of the Global South will provide a powerful lift.
China is supplying renewable technology and infrastructure across the Global South at affordable prices. This will increase productivity across the region and lift the purchasing power of billions of people.
Meanwhile, despite a boom in demand, US labour productivity has been going nowhere for the last three years. It fell to 1.6 per cent the decade before, down from 2.7 per cent in the previous decade.
How can an economy go into recession when more money is available to be spent? This story will stop only when the US bond market crashes. But that is another story.
Andy Xie is an independent economist