In the May 10 issue of my blog I referred to a very interesting IMF paper written by Il Houng Lee, Murtaza Syed, and Liu Xueyan. The study, “China’s Path to Consumer-Based Growth: Reorienting Investment and Enhancing Efficiency”, attempts among other things to evaluate the efficiency of investment in various provinces within China. I argued in the newsletter that the paper supported my contention …
Read More…One of the reasons that it is been so hard for a lot of analysts, even trained economists, to understand the imbalances that were at the root of the current crisis is that we too easily confuse national savings with household savings. By coincidence there was recently a very interesting debate on the subject involving several economists, …
Read More…I have been arguing for several years that once China begins the adjustment process, which I expect to characterize the ten-year period of the current administration, growth rates must slow significantly. My expectation for long-term growth is that it shouldn’t average much above 3-4% annually. This is what it will take for household consumption to rise to roughly 50% of …
Read More…Early this month Martin Wolf had another of his very interesting articles, this time on China, which I think suggests some of the concerns we must have about the upcoming adjustment. Wolf argues that it may be useful to think about Japan as a model for understanding the adjustment process in China since the Japanese model …
Read More…The 2013 NPC and CPPCC Annual Sessions have ended with the formal selection of China’s new leaders. Not surprisingly there were few surprises. My quick take is that the leadership is saying all the right things, but they have been saying these things for quite a while – nearly two years in the case of …
Read More…This post is extracted from my newsletter sent out four weeks ago, at a time when the mood in Europe was much better than now and when there was even a sense that the crisis was in the process of being resolved. I mention this to remind readers of how quickly sentiment can chnage. —— …
Read More…As regular readers know I have often argued that the Chinese development model is an old one, and can trace its roots at least as far back as the “American System” of the 1820s and 1830s. This “system” was itself based primarily on the works of the brilliant first US Secretary of the Treasury Alexander …
Read More…I’ll be watching a number of things in 2013 in order to get a better sense of what the future will bring. On January 22 Princeton University Press will be publishing my book, The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead, and in the last chapter of the book I argue that the great trade, …
Read More…In China, I have argued many times, high growth is no longer compatible with a strengthening balance sheet. If China is growing at a rate that approaches or exceeds five or six percent, it is probably a safe bet that debt is rising faster than debt servicing capacity. The good news is that the current leadership seems very …
Read More…The IMF’s Il Houng Lee, Murtaza Syed, and Liu Xueyan have published a very interesting and widely noticed study called “Is China Over-Investing and Does it Matter?” In it they argue that there is strong evidence that China is overinvesting significantly. According to the abstract: Now close to 50 percent of GDP, this paper assesses the appropriateness …
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