"To move from the abstract to something specific, I will assume, as occurred in 2009-10 as a consequence of the global crisis, that for reasons external to China there is a sharp contraction in its current account surplus, mainly caused by a sharp fall in exports....." (he then goes on to describe the repercussions that match his model.)

Maybe I'm misunderstanding what he's saying, but isn't what he describes true of any export-driven economy? And, doesn't it ignore the fact that a large portion of the country is still pre-industrial and is easy pickings for GDP growth? It should be not terribly difficult to grow GDP via moving these people to an industrial standard of living based on domestic consumption, albeit not nearly as easily as in an export-driven economy where your customers are holding your hand along the path. And, does it not also ignore the possibility of moving up the value chain as their technological prowess increases? China is producing some pretty sophisticated technology on their own these days, and they have no shortage of engineers (although the quality may not be world class, I have no idea).

This isn't to say his theory is wrong, it just doesn't seem terribly useful. But I think I must be missing something?