The Coming China Shock -Project-Syndicate
"In September 2018, we argued that China’s economic and foreign policies were defying the 'laws' of economics and geopolitics, and warned that the situation could not last. Since then, our assessment has been borne out, and our concerns have deepened. Until recently, China had been able to pursue a unique development path, owing to the government’s far-reaching control over the economy (and society more generally). But those days are over.
The country’s internal debts are mounting to unsustainable heights, and domestic investment levels have passed the point of diminishing returns and are veering toward negative territory. Moreover, China’s strategy of fostering exports, promoting industrial 'national champions,' and expropriating foreign technology has crossed the threshold of what the West, especially the United States, is willing to tolerate. In response to the current global slowdown, the Chinese government has decided to loosen restrictions on private and public borrowing. But this will merely aggravate the country’s debt and overinvestment problems. Or, as a famous Chinese saying goes, it is akin to 'drinking poison to quench one’s thirst.'....Unfortunately, any discontinuity in China’s economic performance would have a seismic effect on the rest of the world, because it would lead to a significant weakening of the renminbi...Such a scenario would have a tsunami-like impact on global currencies....One way or another, China’s continued defiance of the 'laws' of macroeconomics, geopolitics, and economic development will hasten its inevitable return to normalcy. When that happens, the world had better brace itself."