The Chinese, despite popular press to the contrary, are not an economic model to emulate. While their country appears to be growing at the same time the U.S. is stagnating, the reality is that their growth is being “bought” with cheap credit, which will not be repaid. Banks are lending tremendous amounts of money to enterprises without profits and without the prospect of profits. The new loans are simply going to be spent on getting the lights on and the payroll paid.
Why are they doing this? Economic expansion in China is necessary to maintain societal calm, particularly in the countryside, where poverty is still rampant. Without new factories and jobs with which to satisfy their citizens’ demands for higher wages, the ruling members of the Communist Party of China and its very industrious military would lose control over the populace. Given China’s thousands of years of history of regime change via popular unrest, and the subsequent death of the previous leaders, it is understandable why the current leadership will maintain growth at literally any cost. For an interesting article on this topic, click here.