EIR LEAD EDITORIAL FOR TUESDAY, JANUARY 18, 2022
A Strategic Significance to China’s Growth Greater Than U.S. in 2021
Jan. 17, 2022 (EIRNS)—At a bad time for the British and U.S. war party which is striving to put down Russia and China in confrontations over Ukraine and Taiwan, China’s annual economic data release has shown that its economy again grew faster than that of the United States in 2021. And more important, China’s credit channel is fully open both for domestic industry and Belt and Road loans, while U.S. banks’ lending cannot grow until the dominant Wall Street megabanks are broken up and reorganized.
This time, financial analysts and business economists in New York and London had widely and confidently predicted, early in 2021, that the U.S. economy’s supposed “red-hot recovery” from what was alleged to be simply a pandemic-induced recession, would cause it to outgrow China’s economy both in 2021 and 2022. They were proven wrong. China’s GDP grew by 8.1% over the year, and South China Morning Post reported that former World Bank chief economist Justin Yifu Lin now estimates China’s economy may become the world’s largest by GDP in 2028, rather than 2030 as he had previously forecast. Industrial production grew by 9.6%, fixed asset investment by 4.9%, job creation was at 12.69 million, and retail sales grew by 12.5%, according to the National Bureau of Statistics release Jan. 17. China’s real disposable personal income, after inflation, rose by 8.1% in 2021—and for urban areas, by 7.1%—while Americans’ average real weekly wages fell by 2.3% over the year.
In a strategic crisis in which an effective partnership of Russia and China has stopped a “color revolution” attempt in Kazakhstan and is pushing to prevent Ukraine from joining NATO, this development makes reality clearer for American policymakers. The feared U.S. Treasury sanctions, including anti-China tariffs, do not work against these two major economic and scientific powers, although they devastate developing-nation adversaries and are killing or exiling millions of Afghans. Sudden coal shortages, price spikes and even blackouts in late summer, triggered in China by London’s global Green New Deal, were handled quickly by regulatory action while Europe struggles.
These economic facts of life will also affect the Federal Reserve and the dominant dollar. The People’s Bank of China was actually lowering interest rates and the reserve requirement ratio for banks as 2021 ended. The Fed supposedly plans several rate increases to “control inflation” which is out of control at 7% for consumer goods and almost 10% for producer goods. But its data presumably show the Fed’s governors that the U.S. real economy is again contracting, after failing to regain even early-2020 pre-COVID levels of activity. Seriously raising short-term interest rates, and the impact on long-term rates, could not only blow out the “everything bubble” of debt, but trigger another deep recession.
U.S. industrial production dropped slightly, −0.1% in December, and is just about equal to late 2019 and −3% lower than its level of mid-2018. Manufacturing output fell by −0.3% in December and is about 5% below the mid-2018 level; again, equal to that of late 2019. Construction investment and employment are lower than in 2018, particularly in “public and government structures,” although contractors are expecting new highway and bridge contracts from the $1.2 infrastructure legislation just passed. Retail sales also fell in December, as a reaction to inflation of consumer goods.
But the most dramatic contrast in the economies, is effective credit policy: Outstanding loans by China’s banks, including overseas lending, grew by 11.7% for the year; and although the big Wall Street and regional U.S. banks are crammed with trillions in excess deposits through Federal Reserve quantitative easing programs, American banks’ loans outstanding grew by less than 0.5% in 2021.
An initiative for a new international credit and monetary system, a Rooseveltian New Bretton Woods, could now originate from the Eurasian “strategic triangle” nations of China, Russia and India and be proposed to the United States as a solution for strategic crises—jointly seek the benefit of third countries. This must begin with modern medical facilities and food aid for Afghanistan and other war-destroyed nations, as Helga Zepp-LaRouche and the Schiller Institute propose.