China has raised the income of its people many times over in the past decades.

You are still not getting it. China improved the living standards and the income of its people by creating huge surplus values which we sent to the West over the past two decades in exchange for foreign IOUs before we can invest domestically to improve our own lives.

A tremendous amount of wealth and surplus values created by Chinese labor and resources have been sent to the West when they could have been used to directly improve the lives of its own people because of neoliberalism. That’s my point!

China can transition into a new model where the government simply runs up the deficit without having to care for trade surpluses. This was how Stalin brought the USSR into a modern industrialized nation after being ravaged in 5 years of civil war where much of the newly formed nation was destroyed and wealth looted.

How is spending power related to housing prices? You don't suddenly make more money just because your house is worth more. You are again obufscating and dodging the issue, namely: who was spending more liberally under conditions when housing prices were skyrocketing (not a good thing btw)? Answer: people who invest in real estate.

Wrong. You obviously don’t understand how people think when purchasing houses (not just Chinese people, but this is the main reason for most people).

Say you are a middle class family and you bought a new house to live in. When the asset price is inflating, if you are suddenly laid off, you still have the back up plan of selling your house and downgrading your living conditions, and take the cut from your house price to sustain yourselves while getting back on your feet. This is how most people see as “investment” when purchasing a new home. So, you will be more “bold” with consumption when your house price is rising because you know there is always a back up option when things go wrong. This was what happened back in 2016-2019 when most people jumped into the house purchasing bandwagon.

However, if the asset price is deflating (we are back to 2017 level, I have friends who have lost 40-50% of their house value at this point), and you are getting laid off, not only can you not sell your house (who’s going to buy a house with a depreciating price??), you still have to pay the same mortgage for the next 20-30 years while losing your main source of income. In this scenario, you are way more fucked than if the house price is inflating.

This is also why the middle class has mostly stopped consuming. Almost everyone I know around me and their families have significantly reduced spending since the last 2-3 years. The post-Covid recovery simply never came, and the economic downturn made everyone afraid of what will happen if they lose their jobs. Everyone is trying to save whenever possible in case of such rainy day expenses. And that causes a downward spiral as businesses receive less income, the workers less wages etc.

Remember that China does not have social safety nets, no jobs guarantee program, no free healthcare. You can get into serious trouble if you lose your jobs. These weren’t so much of a problem when the property market was booming just a decade ago, but they are emerging as cracks in the society now.

You cannot seriously tell me that Chinese workers work and live in the same conditions today as they did 30-40 years ago.

Not sure if you’re serious, but you realize that China has now dominated 90% of the global solar panel industries with no peer competition, right? It is the most advanced manufacturing nation on green technology, yet such dominance in the global market have not improved the wages of the workers in those sectors. Instead, the government is now trying to consolidate the industries due to “overcapacity” so not only will there be losers, there will be many who are about to lose their jobs.

Next you will say that China should emulate Japan's brilliant new economic approach adopted after the Plaza Accords, when they transitioned away from their successful export driven model of the 1970s and 80s.

Which part of the deficit spending and abandoning neoliberal model did you not catch after I have written it for like a dozen times?

You are still thinking in a neoliberal model, comparing what I am advocating with the US and Japan model.

What a bizarre framing. Are you saying that people across the global south do not have needs that are not yet fulfilled? As long as there are needs there is demand.

Well, clearly they’re not because they have listened to the IMF to balance their budget. This is why Global South countries continue to sell to the US and the wealthy Western countries to accumulate their financial assets, before they are allowed to invest domestically.

You are talking about liquidity. Global south countries are too dollar poor to afford to buy in the same quantities as the West but that does not mean there isn't demand. It just means they need to stop trading in the dollar. It means they need to start trading in national currencies and making bilateral deals for e.g. resources bypassing the dollar entirely.

Who is going to accumulate, say, Indonesian rupiah apart from what’s needed to import from the country?

That’s the trouble Russia and India ran into after the Ukraine war started. Russia began diverting its oil sale to India and ended up accumulating a huge amount of Indian rupees it cannot use. In the end, they had to settle with the UAE dirham, and guess what currency the dirham is pegged to? You guessed it… the US dollar.

This is literally a real world experiment that shows bi/multi-lateral trading in national currencies do not work nearly as well as many imagined, and in fact even make the countries more vulnerable now that they have accumulated all sorts of currencies and have to take the extra steps to purchase the currency they ultimately want to save in.

Or they pay China back in ways other than the dollar. They have resources that China needs. Or China foregoes their debts as it has done repeatedly in the past, because by helping their development China also helps itself. When they have more productive capacities they will also have more to sell to China in the future.

Which part of “China is running trade surpluses against these countries” did you miss? China is reducing imports from those countries - which means China is NOT interested in their products (except for raw materials but that’s about the extent), nor does China have the domestic consumer market to absorb their export goods. So we are still back to selling to Western countries to earn the money to pay back their creditors.

Again, the whole point is to abandon the IMF export-led growth model so the Global South countries can trade with each other. In its current form, we’re looking at mercantilism because everyone wants to run trade surpluses when the trade deficit country decides to pull back and imposes tariffs.

You keep claiming you want to stop balancing the budget (running a trade surplus is not "balanced" btw, it's actually by definition an imbalance) but your entire framing relies on the assumption that the "global budget" must be balanced.

International trade has nothing to do with domestic government budget. I don’t understand what you’re asserting here.

Trade deficit is not government budget deficit. Trade deficit means you import more than you export. Budget deficit means the government is spending more than it taxes back. The “deficit” here has nothing to do with one another whatsoever except that government spending can be used to import stuff from other countries, if one chooses to.

Furthermore, you can only massively deficit spend without negative consequences if you print the global reserve currency because doing so is a way of offloading the cost onto everyone else holding your currency.

Who says that? Neoliberal economists?

Are you telling me that Chinese government cannot simply run a deficit to provide a jobs guarantee program to sustain a full employment? What is that if not neoliberalism?

I repeat, you are simply advocating for China to take the US's place in the global system of ripping everyone else off.

Who says that? If China doesn’t want to buy from them, then they will have to sell to the US, at the mercy of Western imperialism.

Is this the same government that you are constantly accusing of operating under a neoliberal framework? I can imagine nothing more neoliberal than wanting to implement a debt driven US style consumption model.

Again, which part of running deficit and abandoning neoliberal model you’re not getting?

Why do you keep looping back to US style neoliberal model? I am literally calling for the end of that.