The Trouble in China Should Be of Little Moment to Us - The American Spectator | USA News and Politics
The Trouble in China Should Be of Little Moment to Us

Hmm. Time to put on my economist’s hat again.

There is a worldwide turmoil about a slowdown in the Chinese economy. Because of noticeably tepid growth in manufacturing in the People’s Republic, there has been a dramatic, even phenomenal drop in the Shanghai Market. Twice in one week it dropped so far so fast that the circuit breakers put in to prevent a total wipeout popped and closed the markets early. On one day they closed within half an hour of opening on a tidal wave of selling.

The U.S. stock markets, in some weird sympathy with China, also went down fast, although nowhere near as much as China, but still by a whopping six plus percent in just one week.

The newspapers and Internet are filled with gloomy tidings, but do they make sense?

I cannot predict the short term movements of markets and I don’t pretend to be able to. But I can count, and this is what I count.

United States exports to the PRC are roughly $125 billion per annum. That sounds like a lot but the total output of the U.S. economy is roughly $18 TRILLION. That means U.S. exports to China are far less than one percent of GDP. But it gets much better.

No one thinks all of our exports to China will stop. If things got truly terrible, exports might fall by 20 percent to roughly $100 billion. That would be a matter of a change of about $25 billion or roughly one tenth of one percent. That is far less than a rounding error in tallying national output. This is a blip compared with any decent-sized business sector in this country. It is just nothing. But it’s made U.S. markets lose roughly $1.5 trillion in value.  

Now, there may be other factors at work here. Maybe wealthy Chinese are selling U.S. stocks to raise money to cover debts in China. Or something else.

But I know stock market traders and if there is one thing they love, it’s fear. Fear lets them sell short. Fear lets them pile on in the sell side with all kinds of clever trades. If they can get the media to help them sell fear, all the better for them.

And, again, I may have missed something. I often do. But from my little vantage point in rainy California what I see is that a big thing in China realistically might not account for a lot in the USA. Again, I may have missed some secret sauce here, but I see mainly traders feasting like vultures on fear that may be justified in Shanghai but might not mean much in St. Louis. Our economy is strong and if it falls, it won’t be because of trouble in China.

Fear makes for bad digestion. Maybe just have a milkshake and watch a movie and forget about China for today.

Ben Stein
Follow Their Stories:
View More
Ben Stein is a writer, actor, economist, and lawyer living in Beverly Hills and Malibu. He writes “Ben Stein’s Diary” for every issue of The American Spectator.
Sign Up to Receive Our Latest Updates! Register

Be a Free Market Loving Patriot. Subscribe Today!