The US and China are the world’s two great economic powerhouses, and both are in heaps of trouble. If they crumble and fall, the UK and pretty much every other major economy else will come crashing down with them. There will be no escaping the fallout.
Which is worrying because both global giants are on the brink right now and face spookily similar problems.
Debt is at the heart of their troubles. China and the US owe a fortune, and their debts are proving unsustainable as rocketing interest rates drive up servicing costs.
At the end of last year, China’s debts totalled a thunderous 297.2 percent of its gross domestic product (GDP).
In other words, three times bigger than the country’s annual economy.
The US wasn’t far behind with a debt-to-GDP ratio of 255.7 percent. The US spends $1trillion a year (£780billion paying the interest on its $13.5trillion debts.
China has been sitting on a $4trillion ticking debt bomb for years and the it’s about to explode as developers like The Evergrande Group and Country Garden face going bust.
A quarter of the entire economy involves building tower blocks that people can’t afford or don’t want to buy, peppering the country with terrifying ghost cities.
Now its entire £2.4trillion banking system is under threat and this could spill over into the UK, too.
In the US, Democrats and Republicans recently performed their regular charade of arguing over whether to raise the country’s $31.4trillion debt ceiling.
Naturally, they agreed to lift the ceiling and spend even more cash, as they always do. The Biden administration is now throwing trillions at its pet projects as if there’s no tomorrow. Does it know something we don’t?
China and the US are in a political mess, too.
Chinese Premier Xi Jinping took office in 2013 with a promise to crack down on state corruption and inefficiency. Instead, he has suffocated the economy with his own brutal cult of personality.
The country once had a thriving tech sector, led by web giants such as Alibaba and Tencent, but Jinping couldn’t stand to see others succeed, and crushed the life out of them.
China’s richest man, Alibaba founder Jack Ma, criticised the country’s financial industry regime in 2020.
Days later Ma disappeared, shortly before launching what would have been a world-record $34.5billion public flotation of the Ant Group in Shanghai and Hong Kong.
He’s believed to be alive but nobody knows for sure. Like Elvis, he’s spotted from time to time.
The Chinese economy is dying on its feet and youth employment is so high that China has stopped publishing the figures.
As for US politics, where to begin? The President is bordering on the senile, while Republican challenger Donald Trump may be heading for the big house.
The country is torn in two over just about everything. Disney can’t even remake kids’ film Snow White without triggering yet another tedious a woke war.
What a mess.
Whoever wins the next US election won’t want to tackle the deficit as nobody will thank them if they do. So what happens next?
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Jinping doesn’t seem to care much about the Chinese economy, he is only concerned with clinging onto power.
He even seems reluctant to pump in the much-needed stimulus to prevent a crash in the immediate future.
Plus his aggressive stance on Hong Kong and Taiwan is driving the West away, depriving China of desperately needed export markets.
Instead, Xinpoing has shackled his country to Vladimir Putin’s doomed regime.
Big business no longer wants to operate in China. It faces endless regulatory hassles and has all its tech stolen because China doesn’t respect copyright laws.
China also faces the mother of all demographic time-bombs, thanks to its ruinous one-child rule (now repealed but too late). It will grow old before it gets rich.
So much for the Chinese century.
This should be an open goal for the US but it looks like blazing wide. Wall Street has rebounded this year due to the artificial intelligence hype, but now there are signs it’s running out of steam.
The economy is motoring but only because Biden is throwing trillions at it. This is forcing the US Federal Reserve to repeatedly hike interest rates to stop it from overheating.
So the two most powerful authorities in the US are in direct policy conflict. It can’t end well. Not for China, not for the US and sadly, not for the UK either. Hold onto your hats.
