Friday, May 25, 2012


The Economist has a Special Report on China that makes for some good and compelling reading.  A few things stand out like the current account surplus shrinking to the question of whether the current low levels of consumption and concomitant high levels of saving are sustainable.  

As you can see form this series of graphs, it is the extraordinary level of investment that is particularly responsible for recent growth, but this is investment in large part done by the government through state owned enterprises.  Such investment by government is the reason for such low consumption on the other end - a good trade off if growth is your aim in the short run, but with it comes a growing demand for social services, education and health care in which the country will have to start investing more heavily.

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