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China and the United States are measured by crises

Five years ago, on the eve of the previous congress of the Chinese Communist Party, the atmosphere in the country and the world was very different. The Chinese were reporting huge economic successes, and the US (where Donald Trump had recently been elected president) wondered if it was time to stop this China instead of cooperating with it. Today, Beijing recognizes that the global and its own crisis looks quite serious, while the United States is fighting in a hopeless hysteria about China, and about the economy, its own and others, and for all other reasons.
It is noticeable that the Beijing media do not fall into the sin of complacency about the economy and, on the eve of the congress, speak honestly about the main problem of the country – the debt bubble in the real estate sector, which is crushing the entire banking system from within. They took out loans, built, invested in housing in anticipation of its growth in value, and as a result overdid it: investments turned into debts – according to some estimates, 250% of GDP. These debts can bring down the banking sector.
In fact, key measures to calm the real estate sector were taken before the congress, mainly in September, and new ones will be taken, with the overall goal of boosting home sales, mortgages and other things, and thereby injecting new money into the industry, preventing it from stopping. Now we have to wait for the report of the highest leaders of the state at the congress, with their assessments of what will happen in the entire economy as a whole.
American economists gleefully explain : China, with its growth model (chronic overinvestment), has fallen into a trap, there are several ways out of it, all bad. Or to revive investments in this and other industries with a spurt so that they drive at the same pace, but then it will become more expensive to change the same growth model in the future, because debts can grow even more. Or slow down all industries at once, then take a long time to restart them. Because with a debt of 250% of GDP, economies do not live well.
General photographing of the participants of the summit of the European Political Community (EPC) in Prague - Novosti, 1920, 08.10.2022
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Chinese economists say that they do not live with such a debt as the United States. At the same time, the whole world cannot count on a fun life either , since America exports inflation everywhere. Why? Because the American Federal Reserve decided to borrow even more, that is, it raises the base rates on loans. This draws money from all over the world, all of which are lent to the United States at high interest rates. True, you can resist by raising your base rate. As a result, exchange rates are falling, the economy is slowing down, and inflation is rising everywhere, but so is the US debt, public and private.
And it actually just topped $31 trillion. That’s more than China, the UK, Japan and Germany put together in a year. The Biden administration alone, in particular, borrowed $1.9 trillion and approved a new $4.9 trillion budget deficit. Do you think where all the new “military aid packages” to Ukraine come from? From there, out of thin air.
It is not only Chinese economists who are horrified. The Wall Street Journal is by no means a Chinese newspaper, but it assesses the situation as follows: it is no longer possible to pile up a mountain. The interest that has to be spent on servicing the debt today requires 1.06 trillion a year, and they are also being raised. An uncontrollable situation arises – when you have to borrow more and more, just to service the old debt.
Graffiti in front of the former US Embassy in Tehran - Novosti, 1920, 09/09/2022
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Well, well, you say. It is clear that no one will ever pay here, sooner or later a default will have to be declared, attributing it, for example, to a world war (which has been going on in a hybrid form for a long time). The authorities are doing just that: to pacify the population, starved by the “fight against the virus”, and also to Ukraine since 2020, they have printed seven “empty” trillion. But so far, American economists remind, the current situation, among other things, slows down its economy – the United States is already in recession. And this reduces the tax base, that is, the budget should borrow even more.
The US economy can give some (less than a percent) GDP growth this year, and will definitely go into the red in 2023. Recall that China is only talking about a slowdown in growth so far, we will find out more when the congress opens.
It’s not even a matter of how the “table” will look like as a result of what is happening, that is, who and in what place will be among the world’s leading economies. It’s an unusual overall picture. The two first economic powers of the world found themselves in a relatively similar situation, but at the same time one of them (the United States) is trying in every possible way to harm the other by introducing any trade restrictions against China and calling it sanctions. Which is understandable in its own way, since in previous global crises, China has won time after time.
Tesla CEO Elon Musk - Novosti, 1920, 07.10.2022
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But during the previous crises, the mechanisms, if not of global cooperation, then of the dialogue of leading economies, for example, the G20, worked. And now something is not heard about the fact that at least something intelligible is being prepared for the upcoming summit in Indonesia of the leaders of the twenty leading countries, except for discussions about whether to take pictures with Vladimir Putin.
Among the many details of the deepening world crisis, one is noticeable: America is plundering Europe, forcibly depriving it of Russian oil and gas and supplying its energy resources at a brutal price, and China … China once counted, among others, on European markets, but if Europe continues to will turn into ruins, then Beijing will have to develop, through cooperation, completely different regions and thereby change the economic map of the world even faster than it is changing.
A US Navy soldier on the destroyer USS John S. McCain in the Taiwan Strait - Novosti, 1920, 07.10.2022
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However, so far it’s not all that bad. Will Europe face a cold winter without Russian oil and gas? China resells there not only Russian energy sources, but also supplies solar panels (having up to 80% of the world’s production capacity). Their export from China to Europe grew by 138% in eight months of the year. And that’s not all – there are still Chinese electrically heated blankets. They go in the same European direction at about 1.3 million pieces per month.
And what do you think – market analysts warn that the European Commission, the government of the European Union, is considering whether to impose protective tariffs on such products in order to stimulate the creation of (someday) their own, European similar industries. The principle “we are sinking, therefore, China must be drowned” also applies.
Flags of the European Union at the building of the EU headquarters in Brussels - Novosti, 1920, 01.10.2022
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