When China Starts Spending, We Will All Pay

China will spend more on both Goods and Social Services

China’s Saving Problem is Ending and US Rates Will Rise From it

◼ China consumption will rise over the coming decade

◼ Demographics and government debt will fuel domestic spending

◼ China will spend more, borrow more, and lend less money outside their nation

The result: global competition to replace capital will rise, harder to find and thus will put upward pressure on US rates for years.

If the West saves too little, the East saves too much—and nowhere more than in China. Culturally, China stands as the mirror opposite of the United States: it favors reality over abstraction, real estate over stock certificates, and hard assets over earnings streams. This mindset is deeply entrenched, rooted in the collective memory of a nation that, just 70 years ago, emerged economically devastated from revolution and had to rebuild itself from the ground up.

China is arguably the most impressive economic turnaround story in modern history. You wouldn’t know it though, from the cautious mindset of its people, who remain unconvinced that prosperity is permanent.

This mindset still shapes how China finances its businesses. Enterprise value is undervalued; asset value is overvalued. A company may secure a loan based on its factory, but not on a decade of consistent cash flows from that factory. These risk-averse lending norms—once instrumental to China's early-stage recovery—now constrain growth. The result: Chinese enterprise values are structurally underappreciated. But change is coming.

Further and ironically, China’s welfare state remains small—even stingy—a legacy of its self-reliant development model. That, too, will have to shift if the country is to compete globally and maintain domestic stability. Expanding social safety nets and shifting toward consumption-driven growth will require massive fiscal commitments.

All this spending, as China retools its economic model, is likely to raise global capital costs—affecting the West in general, and the United States in particular.

Summarily, as China spends on itself, there will be less money to spend on the US globally. China’s pulling in its financial reins of overseas investment will touch all nations driving costs up, and driving standards of living possibly downward.