1/6
"Despite the gloom, most analysts expect the economy to grow above 5 per cent this year, which means China will still drive the global economy as the US and eurozone economies slow."
Not true. This is based on a misunderstanding of Chinese growth.
ft.com
"Despite the gloom, most analysts expect the economy to grow above 5 per cent this year, which means China will still drive the global economy as the US and eurozone economies slow."
Not true. This is based on a misunderstanding of Chinese growth.
ft.com
2/6
If China were able to achieve GDP growth of over 5%, driven (as we had expected at the beginning of the year) by a surge in consumption and an associated surge in business investment, China would indeed help drive the global economy.
If China were able to achieve GDP growth of over 5%, driven (as we had expected at the beginning of the year) by a surge in consumption and an associated surge in business investment, China would indeed help drive the global economy.
3/6
The declining gap between Chinese savings and investment would mean a contraction in China's trade surplus that would add demand to the global economy as Chinese imports outpaced Chinese exports.
The declining gap between Chinese savings and investment would mean a contraction in China's trade surplus that would add demand to the global economy as Chinese imports outpaced Chinese exports.
4/6
But if China's 5% GDP growth is driven mainly by infrastructure and other non-productive government spending, as has been the case so far this year, this does not add to global growth and is more likely to cause Chinese imports to contract relative to exports.
But if China's 5% GDP growth is driven mainly by infrastructure and other non-productive government spending, as has been the case so far this year, this does not add to global growth and is more likely to cause Chinese imports to contract relative to exports.
5/6
Beijing's economic policymakers clearly distinguish between "high quality" economic activity and "other" economic activity. Many analysts and most journalists find it much easier not to distinguish between the two.
Beijing's economic policymakers clearly distinguish between "high quality" economic activity and "other" economic activity. Many analysts and most journalists find it much easier not to distinguish between the two.
6/6
But these are two very different types of growth, with radically different economic consequence for both China and the rest of the world. If that weren't the case, we wouldn't be discussing China's need to rebalance growth.
But these are two very different types of growth, with radically different economic consequence for both China and the rest of the world. If that weren't the case, we wouldn't be discussing China's need to rebalance growth.
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