The US-China competition is often described as a race. A crucial element of the economic competition is a race to the bottom. Both countries have pursued harmful policies sacrificing long-term growth for mediocre or sometimes nonexistent short-term gains. These policies run up debt for an excessive period or for questionable reasons, saddling the national economies with obligations while reducing capital available for more productive uses.

When an economy weakens, calls for (additional) stimulus seem to arise immediately. This is frequently true in the US; it has been continuously true for the People’s Republic of China (PRC) since early 2020, if not before. The PRC has the “fiscal space,” it’s said, to safely borrow more.1 Safely, yes; usefully, no. In fact, China has been borrowing fiendishly since 2008, while its economic growth has slowed. Due to state control of the financial system, there’s no acute crisis looming. But there’s also no effective stimulus to be had—not in 2018, not in 2021, and not now. The PRC has dug itself a debt hole2 faster than the US, and possibly anyone else, ever has. Without considering demography or other factors, debt alone has made it almost impossible for China to win the economic competition.