“The world’s ability to absorb Chinese overcapacity is approaching a breaking point,” writes Michael Froman in a new essay in the forthcoming issue of Foreign Affairs. “And if that breaking point comes, the consequence could be a global economic crisis at a time when governments are particularly ill equipped to manage the fallout.”
“The surest way to avoid this costly chain of events is a preemptive and gradual rebalancing of the Chinese economy,” Froman argues. Beijing has been reluctant to make the necessary policy changes, however, and it may be running out of time. “China would suffer more than the United States” in a potential crisis, he writes. But “the cleanup is likely to fall, as it often does, on the United States and the institutions it anchors.”
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