China’s Fall, Not Its Rise, Is the Real Global Threat

An editorial at Bloomberg Businessweek argues that China’s rise should be less troubling to the West than possible alternatives:

In short, China’s export-driven model could fall apart before consumers are able to pick up the slack.

In such a crisis, China’s economic weight would become a liability. The estimates that the impact of Chinese demand on the world’s largest economies has more than doubled over the past decade. A deteriorating outlook for Chinese imports could send commodity prices plummeting, precipitating heavy losses for investors and risking financial contagion.

There is very little the leaders of the developed world can do to influence China’s fate. , such as the one the U.S. Senate may be on the verge of launching, will only make the situation worse. Instead, and the U.S. need to focus on limiting their own vulnerability: The longer they keep growing at rates not far above zero, the more likely it is that an unexpected shock — such as a Chinese crisis — will tip them back into a recession ….

Prudence requires being prepared for contingencies such as a bad outcome for China. If we don’t solve our own problems soon, we won’t be ready.

Joe Biden and economist Arvind Subramanian have also recently argued that China’s rise need not be viewed as a threat.

October 5, 2011, 1:28 PM
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