China had a few decades of economic growth, technical advances and over 700 million people left poverty. So some things are happening for the good. But can it go on? Is the trade war just what is needed to end the economic growth of China?
But the Chinese economy is government mandated and controlled. It is not a free-market economy. As we all know is the government investment and interventions are resulting in unintended negative consequences.
When the rapid growth was slowing down in China the government did something smart. The removed barriers. So the trade increased.
One of the problems china had to face was the fiat currency it has. It was fixed with the Dollar at a fixed rate. So in the basics, China gave up control over its currency. This power went to the USA.
After the great depression, China went on to stimulate domestic demand. It kept the economy going, but Chinese consumers went there eyeball in debt. Who owns the debt? That is the big question. Some write off needs to happen. But who will do it?
There are plenty of signs that the roller coaster growth in China is coming to an end. If you need to look at an example of the malinvestment in China you just need to look at the ghost cities. Who owns the loans and will take the losses.
But don’t get me wrong. Ultimately China will become the most important economy in the world.