WHAT IS REALLY HAPPENING WITH THE CHINESE ECONOMY?



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ORIGINAL POST

POSTED BY Ed (8 mths ago)
For China’s army of Western admirers, the conclusions set out here are disturbing.

Most strikingly, Chinese economic growth has, over the last decade, become a hostage to borrowing on a gigantic scale. Though used primarily for capacity expansion rather than for fuelling consumption, this borrowing has had a hugely distorting effect on growth. Were China to cease borrowing about 20% of GDP annually, as she does at the moment, growth would fall back from 6.5% to a trend rate of 3.4%.

There must be limits to quite how long China can go on using borrowing to create growth. Based on reported GDP, debt already stands at 246% of reported GDP, up from 141% just seven years ago. When measured against an underlying GDP figure stripped of estimated debt-funded consumption, the ratio climbs to 384%. On this underlying basis of measurement, the ratio could hit 500% within just five years.

In short, the Chinese economy is following the tried-and-failed Western policy of using debt to manufacture “growth”.

There are clear limits to how much longer she can go on doing this.

More https://surplusenergyeconomics.wordpress.com/2017/03/11/89-chinese-whispers/



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