Beijing may criticize American consumers for spending money they do not have, but the truth is Chinese leaders do the same, they just make sure it doesn’t end up on their account.
In its $585 billion economic stimulus package, the central government is contributing just a quarter of the funds needed, leaving the rest of the tab to banks, local governments and the private sector.
By comparison, the U.S. Treasury is expected to fund all of America’s $787 billion economic recovery plan by incurring more debt through the issuance of Treasury bills.
But just like in the West, there’s no such thing as a free lunch.
The Chinese central government might have successfully transferred most of the risks and financing costs to banks and local governments from its own balance sheet, but if bad debt piles up the chickens will still come home to roost in Beijing.