China-US Focus: US Miscalculation on a Chinese Debt Crisis

US leaders may misunderstand Chinese economic fundamentals by assuming that a trade war will trigger a debt crisis that threatens China’s government. Vasilis Trigkas and Qian Feng of Tsinghua University point to three China-specific economic characteristics that could prevent an economic crash. The Chinese Communist Party controls the nation’s information infrastructure which gives regulators time to adjust and respond before a panic. Likewise, the government can swiftly prioritize a national economic emergency over property rights without legal obstacles. Finally, China is transforming into a cashless society, embracing big data collection and social credit, giving regulators more information and power and increasing tax revenues. The two researchers note that “the Chinese economy is not invulnerable to global shocks, but having already amassed an enormous amount of wealth and driven by mass grassroots entrepreneurship, China’s economic vibrancy and debt deleveraging will mostly be determined by domestic politics, smart supply-side reform and sustained opening up.” They conclude that miscalculating China’s determination to battle economic coercion could disrupt the global economic order and even lead to conflict. – YaleGlobal