China revised up its nominal 2018 gross domestic product (GDP) by 2.1% to 91.93 trillion yuan ($13.08 trillion) and this keeps them tracking to the promise doubling the size of its economy by 2020 from 2010. The current round of revisions is the result of the census uncovering previously unrecorded activity. China is tracking to 100 trillion yuan in GDP in 2019 and should have 108-110 trillion yuan in GDP in 2020.
There is real economic growth and activity but it can overstated and even understated at times. The past few years are probably seeing overstated economic figures. However, there is growth in power generation, cities, industry, technological research and more.
China only has about $1.6 trillion in foreign debt. Total China debt is about $40 trillion. China’s GDP will be around $15.3 trillion in 2020.
China’s economic miracle has had a lot of real productivity growth over the last 50 years.
Some China bears have said for decades that China will have some form of debt or economic crisis or economic depression. China’s corporate and government debt is about 305% of GDP. The central government portion is about 60% of GDP. Japan has a government debt that is over 220% of GDP. Japan’s government debit is about $12 trillion.
To encourage economic growth in the region, local governments in China have invested heavily in infrastructure, often using financing structures known as “local government financing vehicles,” or LGFVs.
China is making more and more of the world’s products. If the US Banks were too big to fail in 2007 and 2008 then how can China’s banks and economies not be too big to fail at 15% of the world economy? How about when China’s economy is 20% of the world economy in 2030 or 25% in 2040?
The US economy also has huge flaws and inefficiencies. The US is spending $500-700 billion per year more than China on the military, spy agencies and Veterans administration. The US does get to throw its weight around the world in the middle east and other places. The US wasted most of the $6+ trillion in the middle east wars.
The US overpays for healthcare. The US spends about $10,700 per person on healthcare. This is two to three times more than other developed countries (Canada, Japan, European countries). The average for OECD countries is a little less than $4000 per person. The US is spending about $3.5 trillion per year on healthcare. The US does not have longer life expectancy than the other developed countries. The US does contribute more new drugs and develops more new medical devices and treatments. I think the US could adjust down to $4000-6000 per person with medical system reform without harming medical results. Two-thirds of the medical costs are staffing costs (Doctors, nurses and staff). Canada and other countries have tighter controls on what hospitals and clinics can charge which basically lowers the salaries for doctors, nurses and staff.
The US and China combined economies are about 40% of the world economy. Neither economy could “collapse” without chaos for the whole world. Europe and Japan have virtually zero economic growth and zero to negative interest rates. The US and China are the tallest midgets in the world.
I do not see any day of reckoning for either nation. There can and will be large bankruptcies. China could restructure industries and companies and may have a currency crisis at some point. Ford and GM could go bankrupt in the future.
If this happens ten years or twenty years from now then China will be 70-80% urbanized and most of the workforce will be highly educated. China will still have modern cities and modern infrastructure.
China may be faking some numbers and cheating on various aspects of their economy and with the world system. There are also fragilities and issues with the US economy.
India is faking some economic numbers as well.
We are all just going to keep pretending that all of the emperors have clothes.
What is the difference between this and Greece? Greece had messed up spending and economics but the people were not using it hustle and build anything of value. China could be overvaluing what they are building but they are building like crazy. Greece was also not too big to fail. China has been hustling (aka working hard).
The other aspect is that sometimes markets collapse because of over-supply. The good thing about China’s ability to build rapidly, is that China could unbuild ghost cities or malls. They can replace massive swaths of construction for anything that is unuseful or oversupply. China can unbuild its way out of oversupply. They do not have to wait for market demand to grow to absorb it. China replaced many of the buildings used in the 2008 Olympics months after the games.
If the buildings are only kind of permanent or can replaced in less than a year then they become short term assets or become quick write-offs. Dynamic and fast construction and de-construction can cover or recover any sins of over-supply.
We will continue to build houses, cities and industries and research new technologies. Hopefully, we reach real big innovations (like true Artificial general intelligence, molecular nanotechnology, mass-produced nuclear fission or nuclear fusion, a true space age). The world can then grow its way out.