Sunday, February 22, 2009


China’s Appetite for US Debt

Continuing on the last two posts, people with functioning brains are no doubt wondering how much longer China’s appetite for US debt can last.

As everyone knows, factory shutdowns have sent millions of people back to their dirt-poor villages in the provinces, raising the specter of mass unrest. Beijing will have to spend some money on keeping these people gainfully employed, or on repressing unrest.

Then there is the matter of consumer demand inside China itself. Since consumer shopping vouchers are already being issued, the authorities see demand as insufficient to drive the economy. And take a look at this eyewitness account of conditions inside China, where department store clerks far outnumber customers, and people are desperate to rent apartments at any price. Then check out this piece on Beijing’s commercial real estate bust. Do you smell a disaster in the making?

Sure, the Chinese government is sitting on a big barrel of cash. But as we have seen from the recent experience of automakers, you can burn through huge piles of cash in no time when the going gets tough.

Finally, you have to wonder what the Chinese think they are getting for their money. No matter what, the US is not going to rise back to the high level of unsustainable consumerism that characterized the last few decades. Since the Chinese aren’t stupid, they can surely see that. Sooner or later, no doubt sooner, the Chinese will be forced to show their hand, and it will no doubt be very instructive for the rest of us.

<< Home

This page is powered by Blogger. Isn't yours?