Tim Swanson has an interesting article at Mises that compares the Chinese and US economies:
- Household debt in China amounts to roughly 13% of GDP, as opposed to 100% in America.
- As shown by the IPO of China Railway, the government remains committed to privatizing state-owned firms. This at a time when many Western governments are nationalizing entire industries.
- China continues to implement land reforms. This includes granting land-use rights to peasants, empowering them to lease or transfer land to others — a first in a region that once resembled the collective farms of the Soviet states.
- China has begun legalizing short selling and margin trading. In contrast, this past year the West restricted their use or selectively banned them outright in a self-serving manner.
- China is opening capital markets through QFII and QDII, lowering real-estate taxes and abolishing others like the stamp tax on home purchases. In addition, Yuan convertibility and capital controls are being relaxed across the region.
- China has finally restructured and privatized all of the big national banks. The Agricultural Bank of China (the third largest) recently had its umbilical cord cut and now must sink or swim on its own. This is the opposite of the direction being taken in the West.
- Similarly, while the housing bubble deflates, China’s political class is not (yet) attempting to prop up the real-estate sector en masse. The Fed and US Treasury are doing everything they can to prevent price deflation by purchasing hundreds of billions in mortgage-backed securities.
If you believe that savings and investment is the right recipe for growth rather than consumer spending and debt, the Chinese economy is much better positioned for future growth than the US. Obviously, there are a lot of problems in China (many of them not related to the economy), but one can easily make the argument that they are acting more capitalist than the US right now. That’s sad.