China’s Economic Glide Path

The Economist out with an interesting piece on China’s economic growth.

China faces a more sober economy in 2013

TO ITS many critics, the momentum of China’s economy is sustained by nothing but an outpouring of investment in plant, infrastructure and property. This appears profitable only because each round of investment creates demand for the products of the previous round. If this investment stopped flowing, China’s economy would fall to earth. In 2012 China’s flow of investment did gurgle and spit, especially in housing. The result was a marked economy-wide slowdown. In 2013 growth should stabilise, as investment resumes, and the biggest driver of growth may be the consumer. But growth will not rebound to the 10% annual average presided over by Hu Jintao and Wen Jiabao during their ten years as president and prime minister. China’s new leaders will inherit an economy capable of more like 7-8% a year. This loss of dynamism is inevitable: as economies progress, their rate of advance always slows. See full article.

(click here if chart is not observable)

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