15 June, 2005

can china maintain growth?

Brad Setser looks at the reasons for China’s growth and asks whether it is sustainable. His answer: No.

[Is] China’s current model is sustainable. My strong sense is that the answer is no. 30% y/y export growth implies that China’s exports would more than double every three years…. China now has become big enough that it needs to contribute to global (consumption) demand, not just global supply. How and when that transition will come, however, remains a huge question.

One addition: As a Westerner who was paid in Korean won during the Asian financial crisis, I find myself drawn to Paul Krugman’s old essay on The Myth of Asia’s Miracle. Referencing that, there is also a question of how long China can continue to mobilize new resources. The question is not just how much China has in terms of resources (there is great untapped potential in rural areas) but whether the country stops constraining growth in these areas as it has been doing by following a command economy.

(UPDATE: Original link was to the other econoblogger named Brad, this is the link to Setser. (apologies, I’m blogging before the coffee has kicked in.)

by @ 8:02 am. Filed under China, Money, Asia, Coming collapse, Economy, Northeast Asia

One Response to “can china maintain growth?”

  1. Mark in Mexico Says:

    America’s Secret War

    China, for instance. Here, we often do something very stupid. We listen to the finance minister. Don’t talk to the minister. Look at the figure for bad loans. It’s about $650 billion. Some think it’s really $1 trillion. This is half of China’s GDP. …

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