I’ve already gone over the problems with both the rabid Sinophile “China will bail out the world” view, and its rabid Sinophobe “hard landing will crush China” equivalent.

Both views are broadly wrong with a few small kernels of truth.

Here’s a reminder of the problem:

China does have a property bubble and a scary-sounding $1.6 trillion in local government debt. But $1.6 trillion of local government debt is still significantly less than China’s dollar and treasury hoard. The bottom line is if that China’s real estate market collapses, China can bail itself out with money it has saved from the prosperity years, not through new debt acquisition. This was the lesson of John Maynard Keynes — governments should save in the boom years, to spend in the bust years and even-out the business cycle — a lesson which seems lost on Western policy-makers, who seem to believe that you should borrow massive amounts every year.

So taking the absolute worst-case-scenario, China has plenty of leeway to bail itself out. Of course, this would mean China might decide to liquidate a significant amount of its treasury holdings — especially seeing as bonds are at all-time highs.

Could such a liquidation be the event that finally bursts the Treasury bubble, sending yields soaring and making it much more difficult for America to acquire new debt?

The “China as central-planning disaster” brigade got a leg-up today, with the announcement that China’s GDP had missed predictions of 9.3% growth, instead hitting 9.1%.

Representing the Sinophobe camp, Zero Hedge raised an interesting point:

Suddenly everyone is a China expert, yet doesn’t realize that 9.1% is effectively the equivalent of a 1.1% stall print in an economy where 8.0% growth is the minimum threshold for social order and stability

Now I’m not enough of a China-expert to pluck an arbitrary growth figure out of the air as a “minimum threshold for social order and stability”, but if we want to talk about “social order and stability”, perhaps we should look closer to home — at the #OccupyWallStreet protests that have spilled across America.

From Xinhua:

The distrust and resentment manifested by Occupy Wall Street protesters towards the U.S. financial system could bear precarious consequences on the future of the United States, experts have told Xinhua.

Although the protesters account for only a small percentage of the national population, their frustration with the current economy and some of the government’s policies are shared by many, they said, citing similar rallies in dozens of other U.S. cities as evidence.

“America is in the midst of a massive ideological debate about the future of the country — what its economy will look like, and the role of capitalism and big government in America,” Richard Wottrich, a senior managing director at the McLean Group, told Xinhua.

Though it is still too early to tell what would be the legacy of the protests, the ongoing social movement may prove influential in determining the future course of the country at this difficult hour in its history, Wottrich said.

Luigi Zingales, a professor of entrepreneurship and finance at the University of Chicago Booth School of Business, echoed that the protests are “an indication of all the underlying forces that lead to some form of popular revolt or popular dissatisfaction.”

To get the protestors off the street and quell the fury, Obama and corporate America need to create jobs. Here’s what is needed to get back to pre-Depression employment:

That’s 256,000 jobs a month. Now, I’m not foolish enough to pluck an arbitrary figure out of the air as a “minimum growth rate to maintain social order and stability”, but if I was I’d say 8% growth was a realistic figure.

Of course, this entire argument is blind to the fact that a little social disorder (creative destruction) might be a good thing, and a few riots and bankruptcies might well fire up the engines of creation on both sides of the pacific rim. Of course, this doesn’t change the fact that the means of production are squarely located on the Chinese side of the divide, and that China stands strongly to benefit from this whether or not the CIA can successfully stir up Arab-spring-style protests in Beijing, Shanghai and Guangzhou (probably not).

The likeliest outcome remains that China will have to bail out its real estate and local government securitisation messes; but at least the funds to do it are equity from its trade surpluses, and not new money printing. Of course, new money printing on the other side of the pacific will come as soon as China starts liquidating treasuries. After all — someone has got to keep demand for US Treasury paper artificially high to keep interest rates artificially low and keep America’s debt obligations affordable…