If you've read James Kynge's very worrying book "China shakes the world" (2006), you may be interested in an article he published before then, in November 2004. It's in "The Alchemist", which is the quarterly journal of the London Bullion Market Association. Some salient points (though I can't say whether Kynge would say exactly the same things now):
1. The housing market has soared in China, creating massive wealth.
2. "The economy does not look terribly overheated or overbuilt."
3. "Consumer spending - especially on services - is quite a bit higher than official statistics show." (Perhaps this will answer Richard Duncan's recommendation to stimulate demand in developing economies.)
4. Property prices are so high (in 2004) that the rate of appreciation must slow down, which in turn will reduce the demand for steel, aluminium and cement; "a GDP slowdown is in prospect."
5. In 2003, China was responsible for nearly all the increased demand for copper, nickel and steel, but its appetite will endure: "When, and if, China overtakes the US as the world's largest economy, its people on a per capita basis will only be one sixth as wealthy as Americans. They will still be hungry, still cost competitive."
6. The middle class will grow more quickly than GDP; high-tech industrial wage rates will increase; low-tech factories are being forced inland, away from the trading seaboard.
7. China will move from manufacturing (at that time 60% of GDP, versus 30% in the US) towards services and a knowledge economy.
8. China will not collapse, but environmental problems will slow its industrial growth. Land is already intensively used, the north is short of water; air pollution is increasing the burden of health care to the point where the cost may exceed the value of extra factory output.
9. Demographics will also slow China - the over-60s are expected to rise from 11% of the population in 2004 to 28% by 2040. "China may grow old before it grows rich."
10. "China already has too much stuff" - the oversupply of manufactured goods has wiped out profit margins and the banking system is full of debt.
Going back to point 5 for a moment, Kynge doesn't see an end to the trading imbalance. China may decelerate, but it's still going to suck wealth out of the West for a long time.
No comments:
Post a Comment