Will China turn to war as fiscal stimulus to occupy idle hands? TS Lombard with the note.
With other exits from China’s balance sheet squeeze variously discussed above, the outside prospect of military linked fiscal response is also worth considering. Christopher Granville director of Geopolitical research notes that until recently, the standard debate about the chances of China deciding to invade Taiwan in the present decade has hinged on political arguments.
Taking relative economic decline as a given, such risk assessments focus on the temptation of foreign military adventures as a way of reversing – through nationalist fervour – the damage caused by the ailing economy to the legitimacy of the Communist Party’s rule. This kind of analysis is flipped around by the injection of economic reasoning. The idea here, runs that the attraction for China of going to war may not merely distract from economic setbacks but cure them.