According to Bloomberg, the full budget for the Federal government in $4.6 trillion and China’s is about $3.4 trillion. Many people, including myself, have criticized Trump’s Coronavirus bill that is about $2 trillion and has a strong change of doing severe, long-term economic damage. However, China is no better for according to Zero Hedge, the government just dumped almost three-quarters of a trillion US dollars into her markets to try to jump-start production.
So how did China manage such a spectacular recovery in March?
The answer: the same way China recovers every other time too – by flooding the economy with credit.
According to data released overnight by the PBOC, in March China’s total social financing (TSF) rose to a record high 5.15 trillion yuan ($732 billion), compared to just with 855 billion yuan in February, and nearly double the 3.14 trillion consensus. As a reminder, in addition to new loans, TSF includes off-balance-sheet forms of financing that exist outside the conventional bank lending system, such as IPOs, loans from trust companies and other shadow banking conduits, and bond sales.
The surge in new credit was driven mainly on higher-than-expected loan growth and corporate bond issuance. This, according to Goldman, “demonstrates that the government has been quietly loosening policy, and will likely loosen it more in other areas too, especially given weaker external demand, fairly tight virus control measures and the leadership’s desire to maintain growth stability.” (source)
Where is China getting all of this money from?
She is most likely borrowing it, and to that from the US by way of promises to pay.
Alan Greenspan was correct when he said that the US can pay any debt she wants because she can print the money to do it. China cannot do this.
If China cannot pay her debts, or should her economy default, she is going to have an immediate and serious crash. It will wipe out the economy, put more people out of work than have been put out because of the virus, and since she cannot print money to control her debts, could complete destroy her.
China is going to be the biggest loser in all of this, no matter what the outcome is. Trapped in a mire of economics, history, and politics, the days of the CCP are numbered, they most likely are aware of this, and will fight at all costs to stay alive until as the cycle of Chinese history has been for centuries, the nation is invaded and ripped apart by foreign powers.