BUSINESS INSIDER
China’s economy is finally hitting a wall after years of optimism about the country’s future, former Treasury Secretary Larry Summers said.
“There can now be little doubt that just as the conventional wisdom way overstated the economic prospects of Russia in 1960 and Japan in 1990, so have China’s prospects been greatly exaggerated in this decade,” Summers said in a Washington Post op-ed.
“As with Russia and Japan, this reflects the fact that countries whose growth is driven by super-high capital investment in manufacturing eventually hit a wall,” he added.
“On top of that, China’s export growth engine is stalled by a lack of global willingness to accept more of its production, and its infrastructure and real-estate sectors still must work off the massive overbuilding of recent years,” the former Harvard president continued.
China’s struggling economy has become a worry factor for investors amid fears that the Asian nation’s deepening slowdown could have spillover effects for global markets. The nation is grappling with a property crisis, deflation, and a collapse in trade – crushing all hopes of a post-COVID rebound.
US President Joe Biden went as far as to say China’s economy could be a “ticking time bomb” as the nation also suffers from sluggish growth and high unemployment.
“What does all this mean for the United States? No one should conclude that we can be complacent about the Chinese geopolitical challenge. Indeed, as Russia’s behavior in Berlin, Cuba and Eastern Europe during the 1960s illustrates, nations that see the economic route to glory foreclosed can become irrational and dangerous,” Summers said.
He added there is a good chance that US GDP will surpass China’s for another generation.
