>>i had rubbished almost everything the lady had to say, and done so w/o mercy<<
LOL, I can see why they put you both on a panel together... :o)
China Is Too Large for Its Own Good
Too big to export its way to wealth, it's also too unwieldy to fast-track domestic consumption.
online.wsj.com
By DIANA CHOYLEVA
May 28, 2013, 11:43 a.m. ET
The argument that China has scope for catch-up growth hinges on the fact that its average standard of living is only 17% of America's (when measured using purchasing-power parity, with prices calibrated to U.S. levels). By contrast, Japan ended its near-10% growth phase in the mid-1970s with average standard of living at more than 70% of America's. Some interpret this to mean that for the foreseeable future China can achieve rapid growth simply by importing technologies to boost the productivity of its cheap labor force as it converges on America's standard of living.
This misses a key point, however. China can physically raise production, but that will sustain growth only if China can sell the extra products. And if it can't sell them abroad, then it can grow only by selling more at home.
Small countries can go on capturing shares in big world markets until their income per head catches up. Big countries can't, unless they make world markets commensurately bigger. Either their share of world consumption must grow or their share of world production will stop growing.
China's Economic Dead End
Profits are under pressure because all that investment has made firms inefficient.
online.wsj.com
By DIANA CHOYLEVA
December 6, 2012, 10:27 a.m. ET
The fundamental flaw in China's economy is that it doesn't serve its consumers. The flipside of its high investment rate is low consumption, down to 35% of output in 2011, from 45% a decade ago. This gets economic theory backward: We produce in order to consume and we invest in order to be able to produce more. A country cannot increase its investment relative to output forever.
Ultimately, China's economic strategy is a dead end because, after a while, such investment becomes unprofitable. A point comes when companies cannot sell the extra products made possible by the extra investment. Their profits slump, as we see in China today.
*****
Those among the China bulls who acknowledge wasteful investment still suggest the consumer will take up the baton, and ensure decent growth. But if companies are to slash investment, consumer incomes will be hurt as unemployment rises and wage growth wanes. That risks a demand deflation spiral, which is sure to increase the debt burden and sharply slow down growth, not to mention stress the financial system.
So the likely scenario China will see over the next few years is the share of consumption rising, but with overall growth weakening to at most 5% a year, as the investment share falls. A rising share of consumption won't drive strong growth and help China stay close to its previous rates of expansion, as the bulls like to think. |
