Chapter 12
Is China Structurally Stronger Than the West?
High households’ indebtedness, low savings, uncontrolled expansion of credit to marginal borrowers, adventurous games with structured financial products and poor risk management, public debts hitting critical highs, and the urgent need to accelerate the trimming of the welfare state—this is the list of key structural problems that either drove Western economies into the crisis or are exacerbating it in its aftermath.
By contrast, today’s Chinese economy is mostly free of and largely immune to all those structural diseases. Also, it is in a good position to prevent their outburst in the future.
A lot has been said and written about China’s structural weaknesses. The time has come to assess its structural strengths. It may seem improbable, but compared to the West, the economy of today’s China appears to be structurally stronger and healthier. This is one of the major reasons the global power balance is shifting in its favor.
Improvement of Lending Practices and Persistent Fight with Overheating
As mentioned, Chinese households’ indebtedness is meager while their saving rates are remarkably high. There is the Western culture of living on debt, and there is the Chinese culture of minimizing family debts and keeping them under tight control. Thus, in China there is effectively no room for unaffordable consumption prompted by excessive household borrowing.
In the corporate sector, Chinese banks, most of all state-owned banks ...
