Slow productivity growth and high inflation are denegrating real rebalancing for China. Internal Chinese consumption must increase to offset these effects. Demand for workers is driven primarily by unsustainable and unhealthy increases in the past two years in real estate and infrastructure development, and so is itself unsustainable. But, regardless of the cause, this is unquestionably healthy for China’s rebalancing process. As long as it continues, one of the main causes of China’s economic imbalances – the lagging wage growth relative to productivity growth – has been eliminated and even reversed.
When multiplier relationships are recognized, the conclusion is that the U.S. did not have enough population to produce what it has been consuming.
Free Trade is a very good thing, but free trade taken too far is destructive. Hard data shows why.
The size of China’s GDP is debatable and it is pointless to speculate about when China (or any other economy) might surpass the U.S. The point is that China’s GDP is growing rapidly, fueled by massive investment, and all the rest of the discussion is just noise.
The U.S. blames manipulation of the Yuan for U.S. domestic economic problems. China blames decreased consumption and threatened trade sanctions in the U.S. for stressing trade relations.