China’s economic difficulties are very worrying because in China an economic slowdown is not just an economic problem but a political problem. Will the Chinese leadership turn to nationalism to divert attention from problems at home? Interesting times. and this time that is a curse.
China needs to encourage domestic consumption and with a trillion dollars in reserves they have the funds. Spending the rainy day fund would benefit the U.S. as well, stimulating our exports. It may already be too late, however, to shift smoothly from export to domestic consumption which means that mass capital depreciation will occur as capital investments in export industries turn out to be worth less than first appeared.