China’s economic troubles mark the end of its geopolitical ascent
In the past few weeks, the world has discovered that the Chinese economy has serious problems and might already be in a crisis. The impending collapse of a real estate behemoth is causing analysts to ask if China’s Lehman moment is at hand. One-fifth of the stock of apartments is unoccupied.
There are worries about how China will manage the nearly $9 trillion in off-budget domestic debt that its local governments have accumulated by building bridges and airports to nowhere. One in five young people are unemployed in a country where it takes just over two working adults to support one senior citizen. Economic growth might already be in the vicinity of 3% and might fall to 2% by the end of this decade.
Over the past few years, Beijing lent developing countries nearly $1 trillion to gain global political influence. Most of that money is not coming back. So, several economic indicators are orange and many are now flashing red.
The clearest signals come from looking at what Chinese citizens and private firms have been doing. Households have put their savings in bank deposits and say that they intend to save more. They are neither spending their money nor investing it.
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