Monday, 29 July 2013

Tough choices or tough times ahead for China

The sound and reliable Tom Holland, writing in the South China Morning Post's Monitor column picks apart the challenges facing China's new leaders.  This is important, not only to us here in Hong Kong, the little pimple on the broad back of the Motherland, but also to the world, as its second-largest economy and increasingly engaged and entwined with the global economy....
.... In short, with consumption suppressed, the mainland has developed a dangerous addiction to investment, requiring ever-bigger injections of cheap capital to drive diminishing rates of growth.
If the mainland continues on this trajectory, at some point growth will fall below the minimum level needed to service outstanding debts, and a financial crisis will force an abrupt and extremely painful adjustment.
The article is here (behind registration wall) or here in pdf.