If you enjoy extreme scenarios, you won’t want to miss the
To prove the thesis, Alexander Campbell sets out a provocative “balance of forces”: China needs access to the US-led dollar system, advanced semiconductors, software ecosystems, allied markets, food security, technology transfer and cultural exports. The US, by contrast, needs China mainly for rare-earth processing and some legacy manufacturing. Err … that’s it.
Well, perhaps there’s a little more to it than that.
But one of Campbell’s more pointed insights is his dissection of the Chinese economic model – an infrastructure and housing machine which, at its peak, generated 30 – 50 % of local government revenue, 25 – 30 % of GDP, and accounted for roughly 70 % of household wealth. He reckons that machine is now saddled with about US $7.5 trillion in bad debt.
If there’s even some truth in that, we may need to re-frame how we understand China – not as the rising superpower poised to overtake the United States, but as an economy whose apparent growth has been inflated by Soviet-style development, with today’s ghost cities substituting for yesterday’s moribund steel mills and coal mines.
Perhaps we’ve also overlooked how far China’s official statistics may now diverge from what a market-based calculation would show. If so, we’d need to mark down China’s recent growth and trim our view of its true GDP – about US $19 trillion nominal against America’s US $30.5 trillion, according to the IMF’s April 2025 World Economic Outlook. On a purchasing-power-parity basis, China’s GDP (around US $40 trillion) is a lot larger, but what if that’s a misleading combination of price-level illusion and non-market statistics, rather than real global weight.
We might also allow for the possibility of a long, Soviet-style stagnation as Beijing searches for a new model – or tries to liberalise without losing control.
And one thing the Chinese Communist Party (CCP) will need to pull that off is a vibrant market-led competitive high-tech sector plugged into Western trade networks. Yet that’s exactly where decoupling bites deepest.
So while it’s worth keeping a beady eye on headline aggregates and a jaundiced one on their accuracy, we might want to allow for the chance that the US continues to outgrow China over the coming generation, extending a winning lead, rather than being steadily run down from behind.
None of this is to understate Western vulnerabilities: shaky public finances, debt overhangs, risky private credit, and Europe’s zero-growth, zero-energy dynamism. But while Western crises can force market-led adjustment, China’s state-centred model may prevent it. The CCP’s success in obscuring a slow-burning crisis could reflect not control, but paralysis – an inability to contemplate another Deng-style great liberalisation.
Point of Order readers might ask how much our own policy still rests on the “China growth” story — and whether it’s time to prepare for a world of external shock, harsher adjustment and renewed pressure for market-led innovation and growth at home.
Well, perhaps there’s a little more to it than that.
But one of Campbell’s more pointed insights is his dissection of the Chinese economic model – an infrastructure and housing machine which, at its peak, generated 30 – 50 % of local government revenue, 25 – 30 % of GDP, and accounted for roughly 70 % of household wealth. He reckons that machine is now saddled with about US $7.5 trillion in bad debt.
If there’s even some truth in that, we may need to re-frame how we understand China – not as the rising superpower poised to overtake the United States, but as an economy whose apparent growth has been inflated by Soviet-style development, with today’s ghost cities substituting for yesterday’s moribund steel mills and coal mines.
Perhaps we’ve also overlooked how far China’s official statistics may now diverge from what a market-based calculation would show. If so, we’d need to mark down China’s recent growth and trim our view of its true GDP – about US $19 trillion nominal against America’s US $30.5 trillion, according to the IMF’s April 2025 World Economic Outlook. On a purchasing-power-parity basis, China’s GDP (around US $40 trillion) is a lot larger, but what if that’s a misleading combination of price-level illusion and non-market statistics, rather than real global weight.
We might also allow for the possibility of a long, Soviet-style stagnation as Beijing searches for a new model – or tries to liberalise without losing control.
And one thing the Chinese Communist Party (CCP) will need to pull that off is a vibrant market-led competitive high-tech sector plugged into Western trade networks. Yet that’s exactly where decoupling bites deepest.
So while it’s worth keeping a beady eye on headline aggregates and a jaundiced one on their accuracy, we might want to allow for the chance that the US continues to outgrow China over the coming generation, extending a winning lead, rather than being steadily run down from behind.
None of this is to understate Western vulnerabilities: shaky public finances, debt overhangs, risky private credit, and Europe’s zero-growth, zero-energy dynamism. But while Western crises can force market-led adjustment, China’s state-centred model may prevent it. The CCP’s success in obscuring a slow-burning crisis could reflect not control, but paralysis – an inability to contemplate another Deng-style great liberalisation.
Point of Order readers might ask how much our own policy still rests on the “China growth” story — and whether it’s time to prepare for a world of external shock, harsher adjustment and renewed pressure for market-led innovation and growth at home.
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