Arthur Kroeber by Fantake via FlickrArthur Kroeber explains in the Financial Times why China did not use a magic trick to keep on growing, but 34 percent of extra credit:
The fact becomes even less remarkable when we recognise that nominal GDP (the appropriate comparator for nominal credit growth) grew just 3.8 per cent in the first half. In other words, 10 dollars of new loans were required to generate just one dollar of economic growth.
In fact China’s first-half growth shows one thing and one thing only: the existence of a powerful state with the ability to commandeer its citizens’ wealth and plough it into more buildings, bridges and roads, with no regard for the return those investments will bring.
China is not having a special systematic strength, Kroeber argues, but might be heading for trouble.
More in a great story at the Financial Times
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Arthur Kroeber is also a speaker at the China Speakers Bureau. When you need him at your conference, do get in touch.
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