Sino US Europe: Whose Question Is Most Urgent?

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Whether China, the United States or the euro zone, dragging the problem away for a while has avoided disaster, but the problem has become bigger and more serious.

Whether China, the United States or the euro zone, dragging the problem away for a while has avoided disaster, but the problem has become bigger and more serious.

Which economy will be the first to fall on its own problems?

In Europe, the making of difficult decisions has been dragging on because the main players have not reached agreement on how the problem arises and why.

Germany and other slightly better countries accuse Greece, Portugal and Italy of wanton profligacy. They fear that early help can cause these countries to lose the pressure to solve their problems.

The debtor countries believe that the whole eurozone has lost its balance. The richer countries like Germany should reduce exports and increase domestic consumption, so as to bring the economy back to the right path.

Other European countries say that if monetary policy is centrally managed and governments decide their taxes and expenditures, a unified currency can not survive forever.

In addition, some have warned that the way to get money from the market needs some form of collective guarantee, preferably in the form of Euro bonds.

Germany, as expected, opposed this solution because it meant that wealth would shift from core economies to neighboring countries, from richer countries to poorer countries.

In addition, Europe also has a view that Germany and the European Central Bank (European Central)

Bank) the tightening measures currently under way are even worse than the disaster they are trying to avoid.

They said that the continent needs economic growth, not just reform and tighten its belts, but only if the whole euro area is greatly expanded to stimulate economic growth.

At present, 17 countries and four European institutions involved in the eurozone crisis will continue to try to cope with the situation, but their way of doing so is unsustainable.

The market has lost confidence in piecemeal reforms.

Doubts about Italy, which is too large to be rescued, will only aggravate market turmoil.

Europe will be the first economy that can no longer procrastinate: imagine Greece's disorderly debt default, and Europe's banking industry will face more trouble, and the entire continent will sink into a serious recession.

In China, the necessity of economic reform has become obvious.

As early as four years ago, Premier Wen Jiabao warned for the first time that China's economic growth pattern is unstable, unbalanced, uncoordinated and ultimately unsustainable.

The financial crisis three years ago has long shown that China's economic growth is still heavily dependent on exports from Europe, the United States and Japan, and has reached a dangerous level.

To ensure long-term economic expansion (and political stability), Beijing must find a way to encourage Chinese consumers to buy more products from local manufacturers.

This will require the pfer of wealth from state and state enterprises to families.

But the Chinese government is doing the opposite.

Facing the western market turmoil, the response of the Chinese leadership is not to stimulate consumption, but to increase the expenditure of state-owned and private institutions on fixed assets investment.

This kind of investment accounts for nearly half of China's economic growth.

The result is a sharp increase in the size of residential and commercial real estate and increased spending on infrastructure in the country, resulting in an increase in cheap loans from state-owned banks to state-owned enterprises.

In fact, a major obstacle to reform is that the Chinese government is still investing heavily in the mode of state capitalism.

Fortune 2010 (Fortune)

Of the 42 top Chinese companies listed on the top 500, 39 are state-owned enterprises, and 3/4 of China's largest listed companies are controlled by the government. The party officials who can benefit from the success of state-owned enterprises have gradually gained considerable power within the leadership, and they strongly resist the pfer of their wealth to private enterprises and ordinary people.

China has sufficient cash and foreign reserves to slow down the crisis.

But China's economic growth is slowing down and its financial pressure is increasing. There are good reasons to worry that China's delay in solving the problem will not last long.

The US economy is left behind.

If there is no credible plan to cut welfare and defense spending and increase revenue at the same time, no one can rebuild confidence in the long-term financial health of the United States.

The US fiscal revenue accounted for 60 of the gross domestic product (GDP).

But don't expect Washington to give you a solution right away.

The election season will only exacerbate narrow partisanship and political stalemate, which means that the structural problems of the US economy may continue.

But in comparison with Europe or China, the long-term outlook for the US economy is much brighter.

The United States remains the leader in cutting-edge technology that can expand the long-term economic potential of a country. These technologies include renewable energy, medical devices, nanotechnology and cloud computing.

Over time, these advantages will lead to stronger economic growth.

The United States has population advantages at the same time.

In Europe, the declining birth rate and rising opposition to immigration mean that the population of Europe will be reduced by 100 million by 2050.

Due to the implementation of the one-child policy, the number of labour force in China has begun to shrink.

By 2030, nearly 250 million Chinese will be over 65 years old. The cost of providing pensions and health care for these people will be very high.

Despite the controversy over illegal immigrants, the population of the United States could rise from 310 million to about 420 million by the middle of this century.

According to professional agency Praxis Strategy Group's Hill (Mark)

Schill estimates that between 2000 and 2050, the US workforce is expected to grow by 37%, China will reduce by 10% and Europe will shrink by 21%.

Finally, although the anger of the American public is rising, it is much more likely that the United States will no longer delay the problem of solving the problem compared to Europe or China.

There will be no change in the election year, but 2013 provided an opportunity for real fiscal reform.

Next November, Republicans may win elections in both houses.

If the Republicans are elected, the Republican Party will face enormous public pressure to meet its reform commitments.

Even if President Obama is re elected, the prospect of a major compromise is bright.

He will not be manipulated by the most direct need of electoral politics, and, like other presidents, may begin to consider the legacy he will leave behind.

Please do not make a mistake: the challenges facing the United States are enormous, and a persistent political stalemate may slow down the much-needed fiscal and structural reforms.

But everything is relative. The best of the three big economies is undoubtedly the United States.