If the Chinese were intent on financial reform, and that meant trying perhaps the impossible task of a managed bubble deformation, the genesis of the idea was forged in the United States. China’s vast industrial machine was made to service US consumers and financed with the full throat of euro/dollar expansion, leaving so many goods for sale in US stores stamped “Made in China.” In terms of numbers, the Chinese expected 20-40% export growth to the US; on this side that meant something like 20-30% growth in US imports from China.

Outside of the brief burst of optimism in the immediate aftermath of the Great Recession, when that economic event seemed then the usual temporary if deep interruption in an otherwise stable and permanent growth baseline, “something” has been wrong. From 2012 forward, those growth rates disappeared and never returned. So when China pushed fully forward into its reform agenda it was direct contradiction on Janet Yellen’s recovery. There may have been vast payroll expansion, but from the Chinese perspective those were just statistical numbers as none of the “best jobs market in decades” was reaching the Middle Kingdom. And they desperately needed US consumers to act the part.

I’ve said this before but it bears constant repetition; the PBOC begs to differ with the FOMC and orthodox economists in their narrative about the US economy. And they are putting their “money” where their thoughts are, crossing their fingers that it doesn’t end catastrophically. That is a remarkable and amazing shift, one that perhaps oil traders and global bank balance sheet managers (“dollar” supply) have taken to heart?

I wrote that the middle of December 2014 as still more weak trade figures suggested that US consumers were nothing like what was being described of them. The fact that China was performing financially as it had been (and, of course, continued to be) meant confirmation of the dead recovery in a way that the FOMC could never have managed to counter with just payroll rhetoric. Instead of being reversed, no matter how terrific the unemployment rate in the US has been over the intervening fourteen months, that negative view has prevailed to the extreme.