Either China’s economy is more resilient than the US’s or its $585 billion stimulus package is working better than the American version which has a $787 billion price tag.
Last month, output at China’s factories gained 12.3% from a year earlier. Retail sales climbed 15.4% in August from a year before. It appears that both business and the consumer are doing well on the mainland.
China is not willing to gamble that its expansion will continue without government help, even if the liquidity it pumps into the system causes rapid increases in the value of stocks and real estate. The central government must think that is a small price to pay to get its GDP growth back above 9%.
The American government has to look at China’s success with nearly complete disappointment. GDP in the US will be down this year, and many economists believe it will not be up much more that 2% to 3% in 2010. The liquidity the government has put into the system was used, to some extent, to improve bank balance sheets. Consumer lending has not improved which has helped undermine consumer spending.
The secret of China’s success, in part, is that banks have been freely loaning the money from the government stimulus package. Until that happens in the US, overall growth will probably remain stunted.
Douglas A. McIntyre
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