The need to see China fail verges on jingoism. But if you're looking out for America above all, you should really be praying for China to thrive.
Is China about to collapse? That question has been front and center in the past weeks as the country completes its leadership transition and after the exposure of its various real estate bubbles during a widely-watched 60 Minutes exposé this past weekend.
Concerns about soaring property prices throughout China are hardly new, but they have been given added weight by the government itself. Recognizing that a rapid implosion of the property market would disrupt economic growth, the central government recently announced far-reaching measures designed to dent the rampant speculation. Higher down payments, limiting the purchases of investment properties, and a capital gains tax on real estate transactions designed to make flipping properties less lucrative were included.
These measures, in conjunction with the new government's announcing more modest growth targets of 7.5 percent a year, sent Chinese equities plunging and led to a slew of commentary in the United States saying China would be the next shoe to drop in the global system.
Yet there is more here than simple alarm over the viability of China's economic growth. There is the not-so-veiled undercurrent of rooting against China. It is difficult to find someone who explicitly wants it to collapse, but the tone of much of the discourse suggests bloodlust. Given that China largely escaped the crises that so afflicted the United States and the eurozone, the desire to see it stumble may be understandable. No one really likes a global winner if that winner isn't you.
The need to see China fail verges on jingoism. Americans distrust the Chinese model, find that its business practices verge on the immoral and illegal, that its reporting and accounting standards are sub-par at best and that its system is one of crony capitalism run by crony communists. On Wall Street, the presumption usually seems to be that any Chinese company is a ponzi scheme masquerading as a viable business. In various conversations and debates, I have rarely heard China's economic model mentioned without disdain. Take, as just one example, Gordon Chang in Forbes: "Beijing's technocrats can postpone a reckoning, but they have not repealed the laws of economics. There will be a crash."
The consequences of a Chinese collapse, however, would be severe for the United States and for the world. There could be no major Chinese contraction without a concomitant contraction in the United States. That would mean sharply curtailed Chinese purchases of U.S. Treasury bonds, far less revenue for companies like General Motors, Nike, KFC and Apple that have robust business in China (Apple made $6.83 billion in the fourth quarter of 2012, up from $4.08 billion a year prior), and far fewer Chinese imports of high-end goods from American and Asian companies. It would also mean a collapse of Chinese imports of materials such as copper, which would in turn harm economic growth in emerging countries that continue to be a prime market for American, Asian and European goods.
China is now the world's second-largest economy, and property booms have been one aspect of its growth. Individual Chinese cannot invest outside of the country, and the limited options of China's stock exchanges and almost nonexistent bond market mean that if you are middle class and want to do more than keep your money in cash or low-yielding bank accounts, you buy either luxury goods or apartments. That has meant a series of property bubbles over the past decade and a series of measures by state and local officials to contain them. These recent measures are hardly the first, and they are not likely to be the last.