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Will U.S. Growth Beat China's in 2009?

I can make one criticism of your criticism of China's reflation model. China is a large and diverse country; there's tons of highly-populated places out in the boondocks with backwards infrastructure. Apparently the cant was going around Chinese business circles that relocating your factories towards lower-cost regions didn't make sense, simply because Chinese transportation infrastructure was not up to snuff. This was in 2007. If I recall correctly, the Chinese government is aiming to improve infrastructure in lower-cost regions, so that factories can be moved to areas with lower labor costs.

China: These Trade Numbers Are Awful

I believe you misunderstood me. There's no way I can deny the facts of economic slowdown, increasing unemployment, and shuttering factories in the PRD region. On the other hand, I'd like to dispute the cause; I don't think that an imbalanced economy overly based on exports is to blame.

The problem with your analogy criticizing the value-added approach is that in NYC's case all of the inputs come from the city economy. In China's case, the inputs come from outside the country. So when demand for inputs fall, the detriments are primarily experienced by the supplier countries instead of the producing country. Perhaps I misunderstood something? I thank you for taking the time to write a detailed response to my link; if I'm still mistaken, would you please be kind enough to correct me?

China: These Trade Numbers Are Awful

This is where the idea that China is relatively insulated from a global downturn came from, an article by a UBS economist: www.allroadsleadtochin.... I have the sneaking suspicion that Professor Pettis isn't aware of this article as I've never seen him offering a rebuttal.

Mr. Anderson (lawl teh matrix?) argues that when looked at in value-added terms, the amount of Chinese economic growth supplied for by the export sector is actually quite minimal, especially when compared to countries like Taiwan and South Korea. The fact that Taiwan and South Korea are already experiencing economic contraction, while China is not provides evidence for this contention.

If you hold on to the limited-export-damage theory, then you need alternatives to explain why the Chinese economy has been doing so horribly as of late. I've seen arguments that what really did the Chinese economy in was the collapse of the real estate market and a major decline in investment. There's also arguments that the collapse of the export sector has influenced consumer confidence, and if I understand the Professor correctly, part of it has to do with the Chinese money supply.

China: Credit Is Contracting Rapidly

Anecdotal (apocryphal?) story:

In China, there is lending up and down the supply chain. The supplier to this and that company uses an informal loan to delay payment for goods and services on time. What happened with the recent export bust was that since the decrease in export orders decreased the amount of capital available, this informal lending system started seizing up, as companies were no longer able to loan each other money for payment.