Doomsayers point to the newly constructed Chinese city of Ordos as a sign China’s financial collapse.

But where did China get the money to construct a city for no one? The American Consumer, of course. From 2000 to 2007, China’s trade balance ballooned as Americans gorged themselves on cheap Chinese products. The Chinese felt this massive one-way flow of goods across the Pacific was worthwhile because it yielded promissory notes from the US government.

Will China's export business come in for a soft landing?

The 2009 about-face in spending habits by the US Consumer placed the entire Chinese economy at risk. Each job lost in the US, each percent rise in credit card interest, every home which fell in value, and every small-business who was denied a loan translated into fewer dollars available for the Chinese economy.

Beijing rightfully went into panic-mode given these developments. In 2007, the current account surplus amounted to over 10% of gross domestic product. By 2012, that will likely fall below 4% of GDP. The intelligent stimulus projects by the Chinese government could spur domestic consumption and increase the velocity of money. But the Chinese are in a race against the clock. While the US economy implodes, China has little time to convert from an export-driven economy to a domestic, consumer-driven economy.

One thing’s for sure: Beijing has refused to pin it’s future on the American consumer. China’s taken its cue from Federal Reserve policy of 2001 by increasing monetary supply at a 25% annualized rate, relaxing lending standards, and encouraging a property boom. Speculators have flocked to desolate parts of the countryside. America was able to create 4 years of artificial growth using this strategy. Will China be able to create everlasting growth by printing more money? We recommend readers flip their US history books to 2008 to find the answer.