American politics still tends to think of China in terms of cheap and plentiful exports, and as the hoarder of the globe's manufacturing jobs. But that industrial boom required enormous raw materials, and it came with a rising middle class that wants stuff.
As Joseph P. Quinlan, a chief market strategist at Bank of America, demonstrated in a recent note to clients, that's made China a key source of global consumption as well — a title our politics tends to bestow on America itself. In fact, China recently overtook the U.S. in terms of how many countries rely on it to buy their exports:
(Graph courtesy of Business Insider)
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If the recent slowdown in China does spread, this is the route by which it will happen: By depriving the world of the aggregate demand it needs to keep providing enough jobs and rising income to everyone around the globe.
This also clarifies what should worry us about China. Yes, its authoritarianism is wrong. And yes, it would probably be wise to liberalize its markets. But in many ways China faces the same problem as the already-democratic and already-liberalized U.S. and Europe: Whether its socioeconomic order can keep enough purchasing power in the hands of enough ordinary people to maintain aggregate demand.
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