From John Kehoe, who is smart enough to know better:
Timothy Geithner admits no other country has ever successfully pulled off the kind of economic transition China is attempting. Yet the former US Treasury Secretary says he has a “lot of confidence” that China’s leadership has learnt from past mistakes overseas and can avoid a hard landing.
Mr Geithner, a key architect of the US government’s response to the 2008 financial crisis, gave three key reasons why he was optimistic about the economic and financial outlook for China, in rare public comments in New York.
First, China has high rates of savings, he said.
Second, although the China boom in recent years has been funded by large amounts of debt, Mr Geithner said it was financed largely out of local currency. Hence, this removes the risk of a currency crisis that pulled down Asian emerging market economies in the late 1990s.
Third, unlike the modern capitalist economies such as the United States, the financial system in China is still overwhelmingly run by and guaranteed by the government.
And? I agree with all of it but it’s irrelevant to Australia. The US will benefit greatly in the rebalancing from construction growth drivers to consumption growth drivers. It’s consumer-facing tech sector will love it – already is – and it’s lean and mean manufacturing sector will continue to revive as China prices itself out on household income rises.
Sure, China will grow as a higher value-add competitor but the US is up for that with its huge leads in tech and capital markets.
On the other hand, the RBA and Australian Government have yoked Australia to China’s fading growth model. As China powers away from construction and dirty power, our great gambit on commodities will collapse into a smoking crater and our radically hollowed out value-add sectors will rub the two remaining sticks together looking for a spark.
A successful Chinese soft landing is a crash landing for Australia. Sorry!
