But where Biden has opted to run his economy hot, spending trillions of dollars on household stimulus and infrastructure to goose the economy, Xi is running his cold in a bid to finally break China’s addiction to fueling growth with speculative apartment construction and low-return projects funded by opaque local borrowing. If China is a “ticking time bomb,” Xi’s aim is to defuse it.

The clash of economic philosophies between the world’s two largest economies is already shifting investment flows and may delay the date at which China overtakes the US, or perhaps mean that moment will never arrive. The risk for Xi and his team, led by Premier Li Qiang and Vice Premier He Lifeng, is that the determination to avoid excessive stimulus undermines confidence across the nation’s 1.4 billion people. 

Eoin Treacy's view

China’s banks are organs of the state so they will have to make loans if so directed. Today’s data suggests they are not going to do so until directed. When credit is withheld from the property sector it has a self-reinforcing effect. If consumers can’t get loans, they can’t buy homes and developers are unable to finance construction. China is looking at a very dangerous environment because property development and infrastructure represent a massive chunk of the economy. That has potential repercussions in every commodity exporting country.