China has too many factories. Bulgaria – too much consumption.
Both countries live on credit.
They just spend it in different directions.
This week, two graphs told the same story – from both ends of it.
The first is from Beijing. Prof. Li Daokui, one of the most influential Chinese economists, warned that the Chinese model has reached its limits. The Chinese consume only 35-38% of what their economy produces. Local authorities owe over 100% of GDP for roads, railways and industrial parks, whose capacity is increasingly difficult to fill. Investments are shrinking. This has only happened twice since 1949.
The second graph is from Sofia – from the latest BNB forecast (thanks to Georgi Angelov for highlighting it).
It contains a mystery.
Consumption added 5.3 percentage points to growth.
However, the economy grew by only 3%.
Where did the remaining 2.3 points disappear to?
Across the border. We buy more than we produce. Imports grow, exports shrink. The difference is paid for with loans and government deficits.
One disease. Two opposite symptoms.
China borrows to build. And it went too far. It builds beyond the point where any new factory, highway, or industrial park creates enough value. Today, Chinese industry produces more than its own citizens can buy.
Every surplus seeks its own deficit.
That's why Chinese goods are flooding global markets, including European ones.
The way out for China has long been known: more income and more consumption for its own households. Beijing has been promising this turnaround for more than a decade. And every time the economy slows, it redirects credit back to manufacturing.
Until that changes, Europe has one answer that works – the power of its own market. If you want access to it, you have to produce under clear rules. Increasingly, that means producing in Europe – with European standards and European workers.
Bulgaria is the mirror case.
The paradox is painful.
China is capital-saturated, but it continues to build.
Bulgaria is capital-poor, but it continues to spend.
In our country, every new power plant, transport corridor, industrial zone or modern machine would realize a high return.
But the state debt increasingly finances current expenses, while capital programs lag behind. According to the BNB's own forecast, public investment will decline until 2028.
Therefore, the real debate is not whether the state should take on debt.
Sometimes this is the right decision.
The real question is for what.
Loans for income today are taxes tomorrow.
Loans for energy, infrastructure, industry, technology and skills are an economy that pays off its own debt tomorrow. And salaries that have real coverage.
China overdid construction and is now looking for someone to absorb its surplus.
Bulgaria overspent and is paying the difference with inflation.
History will not remember how much debt we took on.
It will remember what we left behind.
A factory.
Or a receipt.