Why has China bounced while the US is still limping?

3 Sep

Please send in your suggestions…

Here are a few reasons off the top of my head – I will add more when they come to mind:

1. China’s downturn was only partially caused by the US downturn.  In 2008 domestic spending was squeezed by higher food and oil prices.  These are a higher % of Chinese household expenses compared with the US and EU countries. In 2009, commodity prices are down, easing one constraint on private consumption.

2. Pre-US meltdown, China had a tight credit policy aimed at curbing inflation and preventing overheating (esp in construction and real estate).  The US had a lose credit policy.  Thus, in 1H09 China was able to increase lending by relaxing its stricter policy.

3. Chinese households have a lower debt burden than their US counterparts.  As a result tax reductions and stimulus measures are more readily spendable by Chinese consumers, whereas US households are more likely to save.

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