Extract from an interview with Michael Pettis [professor of finance at Peking University in Beijing] on the Daily Ticker talking about China’s economy, which he claims is not headed for disaster, but will necessarily slow as the economy rebalances. Full HD interview can be watched here: http://finance.yahoo.com/blogs/daily-ticker/plenty-things-worry-china-bird-flu-not-one-174030450.html
China has an economy that has been mainly growing due to exports to Europe and the U.S. In the U.S., consumers account for about 70% of GDP. In China, the corresponding figure is about 30%. Now that China exports to Europe and the U.S. are slowing, China GDP will slow significantly. Rebalancing the economy will not happen in 1,3 or 5 years. More like 10,15 or 20 years. Chinese growth can’t recover until Europe and the U.S. recover….provided protectionism doesn’t spoil their party.
I am currently backpacking in China at present. An unusual research method perhaps but it’s as close to the ground as you can get
It appears to me that the investment in the exportable sector is more likely to have stimulated double digit growth rates since 2004 it seems like Olympic Games investment and since 2007 infrastructure and other public projectsl have become the drivers.
None of what I have seen is earning a return much of it never will.
With limited pensions and grandparents needing support for the majority this ponzi scheme can’t possibly survive.
Continued massive spending on infrastructure is unsustainable. China is drifting away from free market toward centrally planned economy and state-sponsored enterprise. History has taught us that will end badly.
I agree. US & European exports will dwindle, while persuading domestic consumers to borrow and spend, rather than save, will take some doing.