The public policy blog of the American Enterprise Institute

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Discussion: (10 comments)

  1. nearly 70% of US GDP is personal consumption expenditures, and just over 13% is fixed investment…

    just 35% of China’s GDP is consumption, while nearly 49% is fixed investment…

    moreover, government consumption accounts for 19% of US GDP (not including entitlements), vs 13% in China…

    so which country has the unsustainable economic model?

    1. Well, considering that consumption drives growth, and that fixed investment has historically led to mis-allocated capital resulting in over capacity (think 1980’s Japan……and 2014 China), I would have to argue that the US economic model is far more sustainable than China’s.

      Don’t believe me? Then perhaps you should ask the Chinese government why that are desperately trying to fix the imbalances in their economy by reducing fixed investment and encouraging more personal consumption. The Chinese are finally coming around to accepting proven economic theory and models…..shouldn’t you?

    2. Answer, the US.

      Fixed asset investment bubble is not sustainable. China is hitting the middle income trap, is poor, lacks resources, and has worse demographics due to one child policy. Accounting for black market financing backed by Govt and conservative estimates of Write offs due to gross over investments in assets where ROI can’t service debt, you are looking at a debt to GDP ratio of 100+%.

      Add to that, China will need to transition to a consumer based economy which can’t be done without throwing growth into a negative trajectory and you are looking at a very difficult transition for a very poor populace.

      To add fuel to fire, they are over populated and lack natural resources per capita with emerging competing powers in their own back yard, yikes!

      Compare to US, virtually inexhastable supply of fossil fuel, one of the most innovative economies mainly because of the consumer culter (high GDP per capita), plenty of arable land, strategic position on NA continent, largest fresh water supply, and net worth in excess of 100+Trillion when consider recoverable resources and we are looking like a great bet to be the foremost economic power for the foreseable future. Sorry, predictions for US demise are premature even after Obama.

    3. What percentage of the economy is swapping digital money back and forth? We do a lot of that.

      1. financial services are a bit over half a percent of GDP…moving money around only adds to GDP when someone collects a fee for it…but no doubt, the nominal money amounts in motion are much greater that GDP…as i recall, last BIS report indicated over $600 trillion in derivatives outstanding….that alone is around 37 times US GDP…

        1. You simply sound like a Mainland Chinese desperate to authenticate their bias. Keep trying…

    4. Source?

  2. PPP GDP is the last thing left to be proud of :) everything else is gone to China to show up with so whatever you call it USA economy sucks!

  3. we don’t think the china numbers are all true. if china cheats with its money dont you think its production numbers could be wrong?

  4. MasterFlint

    The United States after World War II began to rise ! This is common sense do not know!

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