China stands at the precipice of an imminent and severe economic collapse, while experts predict that the United States is likely to remain relatively insulated from its repercussions, as reported by Daily Express US.
President Xi Jinping’s attempts to foster a robust post-Covid economic resurgence have been thwarted by a significant property crisis, plunging the Chinese economy into turmoil. Concurrently, Chinese exports are plummeting, and consumer spending is diminishing, all contributing to the unfolding crisis.
Hans Dau, President and CEO of the strategic consultancy firm Mitchell Madison Group, warns of an impending “crash” as China’s economy falters. Dau asserts, “The China crash will happen and it’s probably serious and long-term.”
Fortunately, experts believe that the US is well-positioned to withstand the fallout. Dau adds, “North America is in a unique position to be almost totally independent of the rest of the world. Mexico and Canada both surpass China as the US’s largest trading partners and US public opinion has turned extremely negative towards China – across the entire political spectrum.”
However, Prof Ivan Katchanovski cautions that the US might not emerge entirely unaffected. Katchanovski notes, “The Chinese economy is slowing down following decades of very rapid growth. This slowdown can affect major American companies which use China as its production base. It might rise prices of goods imported from China.”
Nonetheless, he concedes, “But the slowdown of the economy of China also lowers its demand for imported oil, which can push oil prices lower and help lower inflation in the US.”
Matt Shoemaker, a former Defense Intelligence Agency officer running for Congress, suggests that the US might not have to grapple with significantly pricier Chinese-made goods. Shoemaker explains, “The US-Mexico-Canada free trade agreement signed a few years ago that succeeded NAFTA (the North American Free Trade Agreement), ended up encouraging a lot of offshore companies that had gone overseas, especially China, to come back.”
“In terms of manufactured goods, it is quite possible that we have reached the pinnacle of globalization at this point. There seems to be a shift towards regional consolidation, where goods and services will be produced within the Western hemisphere, instead of the previous globalized system that we had,” Shoemaker continues.
Nonetheless, potential “knock-on effects” are anticipated. Shoemaker asserts, “It will likely speed up how quickly foreign countries leave China. The political scene in the US right now is very hostile to expanding economic partnerships with China. So having a contracting Chinese economy is just going to fuel on the fire to not want to work with them.”
Towards the close of the previous year, China’s debt surged to a staggering 297.2% of its gross domestic product (GDP), equivalent to three times its annual economy. The US trailed closely with a debt-to-GDP ratio of 255.7%. The US expends $1 trillion annually on servicing its $13.5 trillion debt.
Against the backdrop of debates between Democrats and Republicans, the US wrestled with raising its $31.4 trillion debt ceiling. Eventually, an agreement was reached to lift the ceiling and allocate additional funds. Notably, major spending initiatives aimed at curbing inflation, such as the Inflation Reduction Act, have also been introduced.
By: The Mitchell Madison Group
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