Well, China isn’t really going to collapse like some of the bears say, but there will be many people who will be negatively impacted by the changes in the next decade. I think a bigger issue for China is the demographic changes and the dominance of the SOE – which economically will be negative.
As for the US-China, some type of trade deal will get done. But as long as China continues with it’s technology vision (2025) and challenging the tradition status quo of open ocean and air commons, the US/Japan and allies will be in a semi-Cold War. Unless something materially changes, I suspect we’ll see the creation of parallel banking system, technologies, and sphere of influence.
China can keep dumping money in places where there’s no economic benefit – primarily geo-strategic, that’s their prerogative. But the a shift in capital (& manufacturing) to SE Asia and India instead of China will definitely impact China’s growth rate. It’ll start looking like US growth rates in the 90’s (3-4%). We’ll see if China can get past the middle income trap.
**Based on what’s happening in Germany and Japan, the real growth rate in China is probably close to 0% at the moment. Orders all falling off a cliff in those countries.
