| > With the kind of control Chinese government has on everything in its economy l they probably are the one country that could deflate in a controlled manner compared to the rest of the world. See, I used to think this, until as recently as 2014, but now I'm not so sure. I don't think "China" has the total control of the economy that everyone (including themselves) thinks they do. My impression is that the central government in Beijing understands the problems they have very well, and has the right solutions, but then when it comes time to translate that into "action on the ground", they struggle. The issue is that the provincial government leaders don't share Beijing's incentives: they get both tax revenue and political opportunity by continuing to juice the credit bubble and looking the other way at the dangerous techniques used to do that. The last few years of economic news out of China have been like this: - Central government orders reforms to try and gently deflate bubble - Provincial governments obey for a bit, but growth slows and discontent increases. Provincial governments panic and pull back on reforms. - Lather, rinse, repeat. I've come to realize that even authoritarian governments in some sense depend on a popular mandate, even if it's in an indirect way. There might be some way for China to "thread the needle" and balance the opposing goals of deflating their credit bubble before it explodes without stoking popular anger at the hit growth will take, but it's not a sure thing, and if it does happen it won't be because they have total control of the economy. |