Americans are unlikely to return to their free-spending ways any time soon, and unfortunately there is almost no chance at all that Chinese consumers will be able to take up the slack. The Chinese save such a high fraction of their income largely because of long-standing policies aimed at promoting and subsidizing domestic investment and manufacturing.

These policies inevitably require households to foot the bill, primarily through sluggish wage growth, low interest rates on their bank deposits, an undervalued currency and a weak social safety net. Since total savings is just the difference between what is produced and what is consumed, subsidizing producers at the expense of household consumers necessarily causes savings to rise.

But Beijing’s massive stimulus will probably prevent the necessary adjustment toward faster consumption growth from taking place in the near future. Instead of reversing those policies that shift income from households to producers, which might have also caused a surge in unemployment, Beijing forced through a large increase in investment.

As in the past, households will be forced to foot the bill for any misallocated investment or non-performing loans, which could be considerable, making it difficult for households to power consumption growth.

This will be a problem for China and the world. As the U.S. rebalances its economy toward higher savings rates, China has no choice but to rebalance toward higher consumption rates. This can happen either because of a sharp pick-up in consumption growth or, more likely, a sharp slowdown in GDP growth. I worry that China will find it difficult to generate the kind of consumption growth that will take up some of the American slack, and we may be locked into a period during which the world adjusts by growing more slowly.