Few countries are more important to the global economy than China. But its reputation as an unstoppable giant — as a country with an unending supply of cheap labour and limitless capacity for growth — masks some serious and worsening economic problems.
China’s labour force is ageing. Its consumers save too much and spend too little. Its political and economic policy tools remain crude. Its state bureaucracy seems likely to curb spending just as exports weaken, and thus risks deflation. As U.S. consumers retrench, and as the global commodity bubble begins to dissipate, these fundamental weaknesses will combine in a way that’s unlikely to end well for China — or for the rest of the world.
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