Currently, China is economically centralized and politically decentralized. If Prof. Pettis is correct, China will become more economically decentralized and more politically centralized.
That is a thought provoking point. You are I assume pointing out that local governments are given a lot of autonomy (to borrow and build) which is one of the primary causes of that the fixed capital investment dominates the share of the GDP in Pettis' model of China's dilemma. You are also implicitly pointing out for example that the central government will need to assume all of the bad debt....By the way, do you know how much cheaper transport costs by water are vs transport costs by land? When you add in the costs of the road and rail networks, were talking about a 70 fold increase in costs when youre talking about transport costs by land...most of the navigable waterway lies in the south of the country ... protect everyones [physical not virtual Knowledge] trade, the free trade order weve had since World War II will be gone.
IMO irrelevant.
Again I find my disagreement with your analysis hinges on my theory of a fledgling Knowledge Age which will render the physical economy irrelevant. You are egregiously overvaluing the importance of physical trade in the future economy. I believe your model is wrong.
The top-down central government is entirely incapable of being in tune with this bottom-up global paradigm shift of economics. Even I assert Thomas Piketty got the facts wrong in his bestseller Capital in the Twenty-First Century.
The currency wars and China's subsidy of global manufacturing are a beggar-thy-neighbor competition into the deflationary abyss, because the Industrial Age is dying. Factories can produce more than humans can consume in a non-debt saturated economy and only require a small number of humans to do so. Even Oxford U. predicted that 47% of existing jobs would be replaced by automation before 2032. The world's population has to move into the higher valued Knowledge Age, but the governments are subsidizing the old Industrial Age statism model to prevent the masses from being motivated to make the transition. Thus the governments are pushing us to the precipice of a discontinuous, waterfall collapse adjustment and overshoot with a bifurcation of the global economy into a (potentially megadeath) dying statism cancer and a fledgling autonomous Knowledge Age.
I expect China to collapse into this deflationary abyss and fledgling Knowledge Age chaos along with the rest of the globe, but Asia will bottom first because it has much lower levels of constituent liabilities and taxes. It is as simple as that. Your model of the future of the USA is wrong. The future is about how much the State gets out of the way and allows the Knowledge Age to prosper. In the USA, Obama wants to use executive power to take totalitarian control of the internet regulating it as a public utility via the FCC and taxing it 16%. Ditto France. Spain taxes sunlight. The West is done, stick a fork in it. Asia is the future. Sorry Suvy your physical trade model is archaic.
{satire}Prof. Pettis is wise to be moonlighting as an economist while (to fund) his serious career is in his Chinese music label, because creative knowledge production is where the future value is.{/satire}
P.S. Also trade is a very small component of international capital flows, so trade has nearly no relevance on the imminent tectonic contagion of global finance.