News Is economic collapse in the United States imminent?

[mheslep]

...AT the very least, Obama has jeopardized the empire by indebting us to the Chinese to the tune of $1T. They now wield enormous political power over us - all they have to do is decide not to purchase enough notes to make our ends meet. They can effectively dictate policy.

That's a bit hyperbolic, but there is some precedent, as the British no doubt would be quick to point out. (excuse the Wiki reference, but it agree's with my knowledge of the history)
http://en.wikipedia.org/wiki/Suez_Crisis#Frustration_of_British_aims"

...
a military attack on Egypt by Britain, France, and Israel beginning on 29 October 1956.[4][5] The attack followed Egypt's decision of 26 July 1956 to nationalize the Suez Canal, ...

The United States also put financial pressure on Great Britain to end the invasion. Eisenhower in fact ordered his Secretary of the Treasury, George M. Humphrey to prepare to sell part of the US Government's Sterling Bond holdings. The Government held these bonds in part to aid post war Britain’s economy (during the Cold War), and as partial payment of Britain’s enormous World War II debt to the US Government, American corporations, and individuals.

Now the Chinese are far, far from being to able to make the same move. They would have to sell all those US Treasuries, and the question then is who do they sell them to? In other words, they would have to have deep enough pockets to take a bath when selling those bonds, and they don't, not nearly unless they're suicidal. They'd have to be in a similar position as the US in '56 - so much bigger than the rest of the world economically that they're mostly immune to anyone trading partner collapsing. Still, that pressure point is out there somewhere and the US is accelerating toward it.

 

[projektMayhem]

I don't think it's so far fetched. What do you suppose would happen if they buy gold instead of our bonds?

 

[Count Iblis]

I don't think it's so far fetched. What do you suppose would happen if they buy gold instead of our bonds?

I agree. What really matters is not how large the US debt is but what the countries/people who buy the debts think about the return on their investment. So, if they have faith in Obama's policies they will be glad to buy US treasuries.

The perspecive from China, Europe and the rest of the world is that Obama's plans are necessary. So, there is no risk at all for the World to stop buying US treasuries. If Bush had another term in office and he would not reform health care, not bail out the banks etc. etc. and he would want to lend far less money than Obama is doing now, he would face problems. The Chinese would then not want to buy any US treasuries and they would try to sell the treasuries they currently hold.

 

[russ_watters]

I'm sorry, but I must point out the one critical point people seem to have missed here: we are not only running MASSIVE budget deficits, we are also running incredibly large trade deficits - to china in particular.

IMHO, yes, an economic collapse is imminent. We are, in fact, one of the greatest exporters of wealth in the world. Where is our wealth going? China, of course. They are our banker, and we use the money we borrow from them to buy the goods they produce in their own factories.

In order for the exporting of wealth to have a large negative impact on the country, the wealth exporting has to happen faster than wealth creation. The trade deficit is on the order of $320 B a year. That's probably higher than it should be, but it is only 3% of our GDP. Compared to the national deficit/debt, that's not a very significant problem.

 

[WhoWee]

The perspecive from China, Europe and the rest of the world is that Obama's plans are necessary. So, there is no risk at all for the World to stop buying US treasuries. If Bush had another term in office and he would not reform health care, not bail out the banks etc. etc. and he would want to lend far less money than Obama is doing now, he would face problems. The Chinese would then not want to buy any US treasuries and they would try to sell the treasuries they currently hold.

Can you support these claims?

 

[Wax]

Can you support these claims?

http://www.businessweek.com/globalbiz/content/aug2009/gb20090821_005732.htm

In March, China's State Council announced an allocation of $123 billion toward health-care reform. Under the plan, by next year 90% of China's citizens will be covered by a universal health-care system and health-care facilities will be upgraded, including construction of 30,000 hospitals, clinics, and care centers across the country.



It would seem that even a communist country has universal health care.

 

[russ_watters]

It would seem that even a communist country has universal health care.

By definition, I should hope so!

But you aren't equating "universal" with "good", are you? Because in many ways, China is a very backwards nation. We'll just have to see if nationalizing it turns out to be a good thing or a bad thing for them.

In any case, the link you posted doesn't CI's claims at all. People are welcome to their opinions, but without some facts and an argument to back them up, they aren't worth much.

 

[Wax]

By definition, I should hope so!

But you aren't equating "universal" with "good", are you? Because in many ways, China is a very backwards nation.

It's hard to call a nation backwards when they're next in line to be a superpower.

Someone, many posts above, said that the collapse of the U.S. economy would be bad news for China - but you neglected the fact that by the time the dollar takes a nose dive, the Chinese people will have the wealth to buy THEIR OWN products.

No, I have not neglected that fact but you have neglected to realize that a nation that has traditionally saved does not change in one day. Getting the citizens of China to spend doesn't happen over night. It has been estimated to take a period of ten years for China to actually break away from the dollar. So for the time being, the dollar will not collapse and the only real hope that the dollar has relies alternative energy.

 

[WhoWee]

http://www.businessweek.com/globalbiz/content/aug2009/gb20090821_005732.htm

In March, China's State Council announced an allocation of $123 billion toward health-care reform. Under the plan, by next year 90% of China's citizens will be covered by a universal health-care system and health-care facilities will be upgraded, including construction of 30,000 hospitals, clinics, and care centers across the country.



It would seem that even a communist country has universal health care.

Again, can you support THESE claims?

"The perspecive from China, Europe and the rest of the world is that Obama's plans are necessary. So, there is no risk at all for the World to stop buying US treasuries. If Bush had another term in office and he would not reform health care, not bail out the banks etc. etc. and he would want to lend far less money than Obama is doing now, he would face problems. The Chinese would then not want to buy any US treasuries and they would try to sell the treasuries they currently hold."

 

[mheslep]

I don't think it's so far fetched. What do you suppose would happen if they buy gold instead of our bonds?

They could (also at a disadvantage to themselves), but that won't cause a collapse, it would arrest the US going forward with its current deficit spending plans. Mass selling of the US bonds they already own would cause serious damage.

 

[tchitt]

It's hard to call a nation backwards when they're next in line to be a superpower.

No, it's not. The government in China is notoriously oppressive (Tieneman square?) and the fact that they've got the second largest economy in the world doesn't really mean a lot. Anyone can be a superpower with a billion citizens and a nation full of sweatshops.

China:
GDP (PPP) 2008 estimate
- Total $7.916 trillion[6] (2nd)
- Per capita $5,963[6] (100th)

http://en.wikipedia.org/wiki/Peoples_republic_of_china

United States:
GDP (PPP) 2008 estimate
- Total $14.264 trillion[4] (1st)
- Per capita $46,859[4] (6th)

http://en.wikipedia.org/wiki/United_states_of_america

The fact that a communist nation isn't providing its citizens with free healthcare in the first place is pretty appalling. Let alone the fact that they seem to have no qualms about running their people down with tanks.

Count: I'd also like you to substantiate these claims, or retract them as per forum rules:

"The perspecive from China, Europe and the rest of the world is that Obama's plans are necessary. So, there is no risk at all for the World to stop buying US treasuries. If Bush had another term in office and he would not reform health care, not bail out the banks etc. etc. and he would want to lend far less money than Obama is doing now, he would face problems. The Chinese would then not want to buy any US treasuries and they would try to sell the treasuries they currently hold."

Anyway, from what I've gathered this is another one of those things (everything in politics) that everyone's got their own perspective on and no one's really sure what could/would happen at any given time. Perhaps I should start working on my bomb shelter anyway... better safe than sorry!

 

[Count Iblis]

http://www.informationclearinghouse.info/article18146.htm

 

[tchitt]

In what way does that article confirm that if Bush had another term in office that the economy would collapse? Where is there a single reference to healthcare, bailouts, or banks? And to clarify... it was, in fact, George Bush who authorized the bank bailouts in the first place.

 

[WhoWee]

http://www.businessweek.com/globalbiz/content/aug2009/gb20090821_005732.htm

In March, China's State Council announced an allocation of $123 billion toward health-care reform. Under the plan, by next year 90% of China's citizens will be covered by a universal health-care system and health-care facilities will be upgraded, including construction of 30,000 hospitals, clinics, and care centers across the country.

It would seem that even a communist country has universal health care.

By the way, I'd like to share a story about my direct experience with Chinese "health care".

About 15 years ago, as a close associate was completing his PhD in Chemistry, I had an opportunity to become acquainted with several Chinese students. One was completing an advanced degree in international business and his family were senior "Party" officials.

Upon completion, he was permitted to engage in direct factory sales and requested my assistance. I made introductions to a top 50 US manufacturing firm interested in low cost assembly of components they controlled.

I liked the deal because the Chinese would do most of the work and be paid less than 10% of the final price (my commission was actually more than the amount paid to the Chinese). Prior to finalizing the deal, representatives of the US firm needed to tour and approve the enormous manufacturing facility.

To make a long story short, the US reps were so appalled at working conditions, they mandated changes (even though it raised the per unit cost by about 20%). The Chinese argued that it was a good factory and the workers were used to those conditions, but finally agreed.

The comparison of health care in China to health care in the US is like comparing apples to tuna fish.

 

[Count Iblis]

In what way does that article confirm that if Bush had another term in office that the economy would collapse? Where is there a single reference to healthcare, bailouts, or banks? And to clarify... it was, in fact, George Bush who authorized the bank bailouts in the first place.

What the article says is that the Chinese opinion of US policies are relevant. The article is from 2007, so it dates back well before the credit crisis.

 

[WhoWee]

What the article says is that the Chinese opinion of US policies are relevant. The article is from 2007, so it dates back well before the credit crisis.

Wait a minute. You said

"I agree. What really matters is not how large the US debt is but what the countries/people who buy the debts think about the return on their investment. So, if they have faith in Obama's policies they will be glad to buy US treasuries.

The perspecive from China, Europe and the rest of the world is that Obama's plans are necessary. So, there is no risk at all for the World to stop buying US treasuries. If Bush had another term in office and he would not reform health care, not bail out the banks etc. etc. and he would want to lend far less money than Obama is doing now, he would face problems. The Chinese would then not want to buy any US treasuries and they would try to sell the treasuries they currently hold."

How does an article from 2007 possibly support your statement?

 

[tchitt]

http://www.google.com/search?hl=en&source=hp&q=china+concerned+with+US+spending&aq=f&oq=&aqi=

I've got to run to work, but I'm sure you'll find something you find credible in that pile of information.

The U.S. will ensure a “sustainable” deficit by 2013, Geithner said at the beginning of the first round of Strategic and Economic Dialogue talks under President Barack Obama in Washington. China is “concerned about the security of our financial assets,” Assistant Finance Minister Zhu Guangyao said.

 

[Wax]

No, it's not. The government in China is notoriously oppressive (Tieneman square?) and the fact that they've got the second largest economy in the world doesn't really mean a lot. Anyone can be a superpower with a billion citizens and a nation full of sweatshops.

And how does that discount the fact that they are second in line to be a superpower?

The fact that a communist nation isn't providing its citizens with free healthcare in the first place is pretty appalling. Let alone the fact that they seem to have no qualms about running their people down with tanks.

The notion that a communist country doesn't care about their citizens but they are willing and able to provide a universal health care system is a bit contradicting, don't you think?

 

[TheStatutoryApe]

What the article says is that the Chinese opinion of US policies are relevant. The article is from 2007, so it dates back well before the credit crisis.

They are interested in policy only as it regards their ability to make money. They do not care about whether or not they are 'good' policies or they agree with them. Currently they seem quite comfortable purchasing oil from the Sudenese even though it is bankrolling a policy of genocide.
http://www.businessweek.com/globalbiz/content/mar2008/gb20080314_430126.htm

As already pointed out the bank bailouts occurred on Bush's watch.
http://www.cnn.com/2008/POLITICS/09/24/bush.bailout/index.html

Why would China think it is better for the US to have national health care? The medical and pharmaceutical industries are fairly big parts of our economy. Would the health care plan possibly hurt these industries?

 

[Count Iblis]

Why would China think it is better for the US to have national health care?

Because you spend twice as much per head of the population on health care compared to European countries. Outside of the US, the prevailing view is that your health care system is very inefficient and that it hurts the US economy. So, reforming the system would be welcomed by countries who buy/hold US treasuries.

 

[Ivan Seeking]

In order for the exporting of wealth to have a large negative impact on the country, the wealth exporting has to happen faster than wealth creation. The trade deficit is on the order of $320 B a year. That's probably higher than it should be, but it is only 3% of our GDP. Compared to the national deficit/debt, that's not a very significant problem.

A trade surplus is what we need; not an "acceptable" deficit. Also, by adding 3%-5% to the GDP - added to what some people now consider a healthy economy - the debt is far more sustainable. How about a 3% gain as the proper goal, rather than a 3% loss?

Note that oil imports alone are worth about half of the budget deficit. While that doesn't translate directly, it could be applied directly in the form of taxes on domestically produced fuels [in place of imports], and it can certainly help to keep things in perspective. Depending on the price of crude, imported oil is worth between $400-$600 billion a year. If that isn't significant, then no one should be complaining about the bank bailouts or the cost of the wars. And unlike the bailouts, we pay for oil every year.

 

[TheStatutoryApe]

Because you spend twice as much per head of the population on health care compared to European countries. Outside of the US, the prevailing view is that your health care system is very inefficient and that it hurts the US economy. So, reforming the system would be welcomed by countries who buy/hold US treasuries.

It may somewhat effect the economy with regard to worker productivity and performance but with the way it is are there not many large corporation making large sums of money off of the situation? If the chinese are interested in making money off of the US is it really very clear which system will be more profitable?

Edit: Perhaps a good measure would be to look at how much they invest in countries with national health care versus those that do not. Maybe we can look that up.

 

[WhoWee]

A trade surplus is what we need; not an "acceptable" deficit. Also, by adding 3%-5% to the GDP - added to what some people now consider a healthy economy - the debt is far more sustainable. How about a 3% gain as the proper goal, rather than a 3% loss?

Note that oil imports alone are worth about half of the budget deficit. While that doesn't translate directly, it could be applied directly in the form of taxes on domestically produced fuels [in place of imports], and it can certainly help to keep things in perspective. Depending on the price of crude, imported oil is worth between $400-$600 billion a year. If that isn't significant, then no one should be complaining about the bank bailouts or the cost of the wars. And unlike the bailouts, we pay for oil every year.

Ivan, let me say it for you - DRILL BABY DRILL!

 

[tchitt]

And how does that discount the fact that they are second in line to be a superpower?

I didn't say that it does. Russ noted that China is a backwards nation which could mean any number of things. You're the one who somehow twisted it into "China could never be a superpower."

notion that a communist country doesn't care about their citizens but they are willing and able to provide a universal health care system is a bit contradicting, don't you think?

Communism (from Latin: communis = "common") is a family of economic and political ideas and social movements related to the establishment of an egalitarian, classless, or stateless society based on common ownership and control of the means of production and property in general, as well as the name given to such a society.

http://en.wikipedia.org/wiki/Communism

Do you have any basic knowledge of civics? I assumed you realized that a communist government is expected to provide virtually everything for their citizens because the state owns everything.





Now tell me they care about their citizens. Really.

Count Iblis: http://www.bloomberg.com/apps/news?pid=20601103&sid=aaVGe5smuZAU

Again...

Treasury Secretary Timothy Geithner pledged to rein in the U.S. deficit as China underscored concern about preserving the value of its $801.5 billion of Treasury holdings.

The U.S. will ensure a “sustainable” deficit by 2013, Geithner said at the beginning of the first round of Strategic and Economic Dialogue talks under President Barack Obama in Washington. China is “concerned about the security of our financial assets,” Assistant Finance Minister Zhu Guangyao said.

China is not happy about all the spending... your point is moot and you're basically speculating on something which you've apparently got no knowledge on. To continue repeating that mantra when it's contrary to facts only serves to weaken your position. Obama himself has come to admit that healthcare reform is going to cost a lot of money... as opposed to his earlier claims that it would save us money. No one bought it.

 

[russ_watters]

It's hard to call a nation backwards when they're next in line to be a superpower.

It should be pretty obvious that you can be powerful but still be backwards. All power requires is being big. China is big but not developed.

 

[russ_watters]

A trade surplus is what we need; not an "acceptable" deficit. Also, by adding 3%-5% to the GDP - added to what some people now consider a healthy economy - the debt is far more sustainable. How about a 3% gain as the proper goal, rather than a 3% loss?

Two things:
1. You misquoted me there. I didn't use the word "acceptable", nor did anything I said imply it. That's dishonest. Words in quotes should be quotes.
2. I agree that it should be lower. I said so explicitly!
3. You're responding to something that wasn't being discussed. The question I was answering was whether the trade deficit was leading us toward economic collapse. The answer is no.

 

[mheslep]

As already pointed out the bank bailouts occurred on Bush's watch.
http://www.cnn.com/2008/POLITICS/09/24/bush.bailout/index.html...

The first bailout of a non-deposits-only bank was Long Term Capital Management in 1998, pushed by the NY Fed. There were warnings at the time that the bailout would encourage more risks of the same kind. The recent mortgage securities related failures began under Bush/Paulson, but a substantial part of the bailout money (if not the majority) was handed out and redirected under Obama/Geitner, including large parts of the AIG bailout, Fannie&Freddie money.
http://en.wikipedia.org/wiki/Long-Term_Capital_Management#1998_bailout"
http://www.insurancejournal.com/news/national/2009/03/01/98275.htm" (March 1, 2009)

 

[Galteeth]

Short answer: Large scale human behavior and interaction with the environment is one of the most chaotic systems we can classify. Good luck trying to make accurate predictions of what's "imminent."

 

[Wax]

It should be pretty obvious that you can be powerful but still be backwards. All power requires is being big. China is big but not developed.

Sorry, but you are mistaken. Have you ever been to China? They have a much nicer infrastructure and they are still developing at a 6% growth rate while America will probably see no growth this year.


http://www.prospect.org/cs/articles?article=the_china_path

You may remember when the world was divided between communism and capitalism, and when the Chinese were communists. The Chinese still call themselves communists, but now they're also capitalists.

In fact, visit China today and you find the most dynamic capitalist nation in the world. In 2005, it had the distinction of being the world's fastest-growing major economy.

China is the manufacturing hub of the globe. It's is also moving quickly into the highest of high technologies. It already graduates more computer engineers every year than the United States.

Its cities are booming. There are more building cranes in use today in China than in all of the United States. China's super-highways are filled with modern cars. Its deep-water ports and airports are world class. Its research and development centers are state of the art. At the rate it's growing, in three decades China will be the largest economy in the world.

Communist, as in communal? Are you kidding? The gap between China's rich and poor is turning into a chasm. China's innovators, investors, and captains of industry are richly rewarded. They live in luxury housing developments whose streets are lined with McMansions. They dine in fancy restaurants, and relax in five-star hotels and resorts. China's poor live in a different world. Mao Tse Tung would turn in his grave.

So where are the Chinese communists? They're in government. The communist party is the only party there is. China doesn't have freedom of speech or freedom of the press. It doesn't tolerate dissent. Authorities can arrest and imprison people who threaten stability, as the party defines it. Any group that dares to protest is treated brutally. There are no civil liberties, no labor unions, no centers of political power outside the communist party.

China shows that when it comes to economics, the dividing line among the world's nations is no longer between communism and capitalism. Capitalism has won hands down. The real dividing line is no longer economic. It's political. And that divide is between democracy and authoritarianism. China is a capitalist economy with an authoritarian government.

For years, we've assumed that capitalism and democracy fit hand in glove. We took it as an article of faith that you can't have one without the other. That's why a key element of American policy toward China has been to encourage free trade, direct investment, and open markets. As China becomes more prosperous and integrated into the global market -- so American policy makers have thought -- China will also become more democratic.

Well, maybe we've been a bit naive. It's true that democracy needs capitalism. Try to come up with the name of a single democracy in the world that doesn't have a capitalist economy. For democracy to function there must be centers of power outside of government. Capitalism decentralizes economic power, and thereby provides the private ground in which democracy can take root.

But China shows that the reverse may not be true -- capitalism doesn't need democracy. Capitalism's wide diffusion of economic power offers enough incentive for investors to take risks with their money. But, as China shows, capitalism doesn't necessarily provide enough protection for individuals to take risks with their opinions.

 

[mheslep]

Sorry, but you are mistaken. Have you ever been to China? They have a much nicer infrastructure and they are still developing at a 6% growth rate while America will probably see no growth this year.


http://www.prospect.org/cs/articles?article=the_china_path

You may remember when the world was divided between communism and capitalism, and when the Chinese were communists. The Chinese still call themselves communists, but now they're also capitalists.

In fact, visit China today and you find the most dynamic capitalist nation in the world. In 2005, it had the distinction of being the world's fastest-growing major economy.

China is the manufacturing hub of the globe. It's is also moving quickly into the highest of high technologies. It already graduates more computer engineers every year than the United States.

Its cities are booming. There are more building cranes in use today in China than in all of the United States. China's super-highways are filled with modern cars. Its deep-water ports and airports are world class. Its research and development centers are state of the art. At the rate it's growing, in three decades China will be the largest economy in the world.

Communist, as in communal? Are you kidding? The gap between China's rich and poor is turning into a chasm. China's innovators, investors, and captains of industry are richly rewarded. They live in luxury housing developments whose streets are lined with McMansions. They dine in fancy restaurants, and relax in five-star hotels and resorts. China's poor live in a different world. Mao Tse Tung would turn in his grave.

So where are the Chinese communists? They're in government. The communist party is the only party there is. China doesn't have freedom of speech or freedom of the press. It doesn't tolerate dissent. Authorities can arrest and imprison people who threaten stability, as the party defines it. Any group that dares to protest is treated brutally. There are no civil liberties, no labor unions, no centers of political power outside the communist party.

China shows that when it comes to economics, the dividing line among the world's nations is no longer between communism and capitalism. Capitalism has won hands down. The real dividing line is no longer economic. It's political. And that divide is between democracy and authoritarianism. China is a capitalist economy with an authoritarian government.

For years, we've assumed that capitalism and democracy fit hand in glove. We took it as an article of faith that you can't have one without the other. That's why a key element of American policy toward China has been to encourage free trade, direct investment, and open markets. As China becomes more prosperous and integrated into the global market -- so American policy makers have thought -- China will also become more democratic.

Well, maybe we've been a bit naive. It's true that democracy needs capitalism. Try to come up with the name of a single democracy in the world that doesn't have a capitalist economy. For democracy to function there must be centers of power outside of government. Capitalism decentralizes economic power, and thereby provides the private ground in which democracy can take root.

But China shows that the reverse may not be true -- capitalism doesn't need democracy. Capitalism's wide diffusion of economic power offers enough incentive for investors to take risks with their money. But, as China shows, capitalism doesn't necessarily provide enough protection for individuals to take risks with their opinions.

Wax - you need to quote all that copied text. Use the Quote symbol in your message tool bar. And all those statements asserted as facts deserve a reference.

 

[Wax]

Wax - you need to quote all that copied text. Use the Quote symbol in your message tool bar. And all those statements asserted as facts deserve a reference.

Sure thing! I just thought it was common knowledge among people who keep up with economics. Six percent growth rate for China is considered a hard landing. They normally grow at 10%.

http://www.radio86.co.uk/china-insight/special-reports/china-and-the-financial-crisis/news/9282/china-can-withstand-a-growth-rate-of-6-in-2009-academic

Recently, the Chinese government has enacted a series of measures to bolster confidence in maintaining economic growth in 2009. It can be surmised that the country has set itself a target of achieving a growth rate of 8 percent in 2009. However, in an interview with the Economic Observer, Director of Nanjing Construction Committee, and Macroeconomics expert Lu Yulong expressed the view that China can tolerate an economic growth rate as low as 6 percent in 2009.

A range of information makes it clear that there are some severe shortcomings in China's economic structure, such as a widening gap between rich and poor, increasingly severe unemployment issues, and the need for a social security system and a basic medical security system. It is widely suggested that if an 8 percent growth rate cannot be guaranteed, problems and issues that are currently simmering under the surface will have to be faced by the government.

However, as a scholar who has studied macroeconomics since the 1980s, Lu Yulong holds the view that the current economic slowdown in China is more a case of returning to a normal growth level. "It is something of a miracle that China has achieved a target growth rate of over 10 percent in the past 30 years," he noted.

"In fact, many social problems have been caused by excessive growth. For example, some local governments have implemented large-scale demolition policies, in order to speed up urban construction, which correspondingly generated housing and employment problems," Lu said. "From now on, China must say no to single-minded pursuit of growth."

According to Lu, overproduction is a major problem in China. At present, automobile production already exceeds 10,000,000, and the country is already first in the world in iron and steel production. In these circumstances, China must take more measures to decrease energy consumption, enhance technological capability and lower production costs, rather than focusing exclusively on volume of production.

After the 1998 economic crisis, the Chinese government promptly adjusted its policies, which allowed economic development to enter a new round of rapid growth.

"However this is 2008, and we should not be over-optimistic about the effects of government policies during the current severe international financial crisis. The situation today is totally different," Lu said.

"Firstly, China has just made a start in housing system reform, and housing demand is a significant driver of domestic demand; secondly, the current foreign trade situation is one of overproduction and market saturation, while in the years following 1998 there was high growth in international demand; thirdly, at present the hidden liabilities of some local governments already exceed annual fiscal revenues, which makes it dangerous to continue with a fiscal deficit policy, " he added.

Deutsche Bank lowered its forecast for China's expected GDP growth rate in 2009 from 7.6 percent to 7.0 percent, suggesting that the fiscal deficit to achieve a target of 8 percent GDP growth will be beyond the government's capacity. It expects that ultimately the Chinese government should and will accept a GDP growth rate of 6-7 percent.

http://english.peopledaily.com.cn/90001/90778/90858/90864/6537086.html
I'm not going to paste this complete article, only point out that growth rate in the U.S. is zero to nothing for this year. The next powerhouse is China and they are not underdeveloped.

Under its new forecasts, the Fed now believes the world's largest economy could be flat or grow by just 0.3 percent this year

Edit: The notion that china is purely a sweatshop economy is far from the truth. Their economy is based on undervaluing their currency and providing a high level of education so that the same goods and services are sold at a lower rate then other countries. This works in their favor in two ways. They are able to purchase their own goods at the cheaper prices and at the same time they export at a lower rate then other countries.

Here's a youtube video so you can see for yourself how much they have developed.