1. If US demand falls by 5%, that's already 475B USD demand. Given that Europe is entering recession and China could not count on India's demand (at least). China could not find another market large enough now to sustain its excess capacity.
2. China's aggregate demand, no matter how much gov spending is added, will not be enough to fill in the gap due to export order loss.
And China's miserable stock market, real estate market and late social welfare reform could not stir up more demand.
Europe was hit by America through the financial market link(banks). China is more immune from inter-bank hits, but it is heavily exposed to US demand collapse.
