The hottest debate over the world economy these days is not on the fate of America, it’s on the fate of China. Will it be the worst victim, or the most successful survivor, of the global crisis of 2009? So far the news all points to success, as numbers out in the last week or so show China defying the old assumption that an American recession would trigger a Chinese depression. Long dependent on exports to America, China continues to grow strongly despite a collapse of exports, down 26.4 percent in May alone. The reason is growth at home, with retail sales up 15.2 percent in May, and house and car sales taking off. To some this is evidence that China has hit a new state of development, emerging as a consumer society wealthy enough to rival America as the world’s best customer, and in some ways it has. The problem is that the consumer driving the boom is not the individual, because the lone Chinese shopper has been in retreat in recent years. The real big spender is the government.

China’s economic recovery is real, but it’s been bought by the state. No political party in the world can spend quite as freely right now as China’s communist party, with its nearly $2 trillion in reserves and budget authority unchecked by rival parties or insitutions. Beijing’s stimulus plan amounts to 4 percent of GDP, double America’s 2 percent, and China can deliver this booster shot without resort to foreign borrowing. Government investment has accounted for an unusually large share of the Chinese economy for years, and it is up 30 percent since the beginning of the year, with 75 percent of the money going into infrastructure – spending on rail lines and roads has more than doubled over the last 12 months. New community centers, conventional halls and sports facilities are springing up in major cities and provinces. Subsidies are multiplying, as central and local governments move to support idle factories, retrain workers, and boost income aid in hard hit areas. New government lending, as well as government orders to banks to raise lending, is helping to spur a surge in apartment sales. The state is even handing out spending vouchers directly to consumers, particularly in rural areas, good for cars, refrigerators and other products, many of which are made in China. . As a top executive at one Chinese state owned bank told me in May, "This is all about the government propping things up."

Any real consumer boom -- one with legs -- will require individuals to unzip their wallet sans subsidies. When will that happen? Not until China starts giving its people basic healthcare and pensions at a broad level. If you get sick in China these days, it's cash down before you see a doctor. Likewise, only about 20 percent of the population has any retirement pension. That's why the personal savings rate is still 30 percent, and the overall share of personal consumption in the economy has been decreasing over the last few years. In China, even more than in the U.S., rainy days are serious business. For more on this, check out my piece on the Chinese recovery in next week's edition of the print magazine.