Saturday, April 16, 2011

Something for the weekend

China’s Bad Growth Bet

China has grown for the last few decades on the back of export-led industrialization and a weak currency. When exports collapsed in 2008-2009, China’s leader reacted by increasing fixed-investment - infrastructure, real estate, and industrial capacity. Thus, China did not suffer a severe recession – as occurred in Japan, Germany, and elsewhere in emerging Asia in 2009 – because fixed investment exploded. The fixed-investment share of GDP has increased to almost 50%. The problem, of course, is that no country can be productive enough to reinvest 50% of GDP in new capital stock without eventually facing immense overcapacity and a staggering non-performing loan problem. China is rife with over-investment in physical capital, infrastructure, and property.

Posted by drewster @ 02:31 PM (1510 views)
Please complete the required fields.

One thought on “Something for the weekend

  • Drewster, I think you have encapsulated it all in the above.

    Does anyone have a shoehorn?

    Please complete the required fields.

Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>