Trying The Scenario With A Regular Staff Account

This is all to say that the economic picture facing Trans-Atlantis is deeply fragile. If a full-fledged economic crisis strikes, how will it fare? Will it remain internally unified and resilient, or will its existing political, cultural, and class conflicts become hyper-charged? Will its governing class react proportionately and competently, or will they panic and make a further mess of it? Will Europe maintain its commitment to putting strategic security first, or will it turn back towards the temptation of betting on the Chinese market to provide an economic boost? Will other countries in dire economic and financial difficulty turn to America and Europe and find the assistance they will seek, or will they need to turn to anyone that will help them, including China? I would bet the latter answers are a lot more likely.

Before Xi gets too excited, however, he should also consider China’s own position. China’s economy has been slowing steadily as its state investment-driven growth model has reached a point of diminishing returns and its demographic profile worsens. Meanwhile all that infrastructure spending has also pushed its debt levels into very dangerous territory. Total Chinese debt reached at least 280% of GDP in 2021, and that figure does not include piles of murky debts kept off-books in the shadow banking sector – the real total could be much higher.

This addiction to debt-financed growth is already facing a reckoning after the default last year of Evergrande, a real estate firm with some $300 billion in liabilities, kicked off a slow-motion crisis in the Chinese property sector. More than 10 big Chinese property firms have since defaulted, including on some $14 billion in bonds – this in a sector that represents as much as 29% of all Chinese GDP and entangles more than 40% of China’s $45 trillion in banking sector assets.