Landing – the sustainability of growth

Paul French has a go at an earlier column I wrote for Chinabiz on the overheating of China’s economy in a way almost only Paul can do that. Fortunately, we agree on the main point. China’s problems are surmountable on the short run, when there is a problem, it is on the long run. “In the WTO Column mentioned above (The Landing: In Your Safety Position - 20/7/2004) Professor Wu Jinglian wisely points out a major flaw in China's economy - that each dollar earned in China costs 8 times more energy than in the US. It is a fact that over the past decade China has on average invested nearly 40% of GDP and generated an average growth rate of 8% (20 cents of growth for each buck coughed up in investment). This is truly shocking, even India gets something like 25 cents to the dollar on a 25% investment rate,” writes Paul. “The answer is pretty simple though not as simple as just shouting market economy. Reduce waste, trim the fat, improve the operation, seriously deal with NPLs and lending, distance the state planners and China could easily achieve between 9 and 10% growth without any overheating. So understand the meaning of the term overheating, then throw it out, then hopefully you see that growth in China of around 9% per annum is indeed sustainable.”
There are still a few details to solve, before a 9 percent growth can be sustainable.