China’s GDP has depended largely on huge investments in infrastructure, rather than consumption. Economic analyst Arthur Kroeber argues in IBNLive that this policy is not longer possible, although ending it might be a tough call as the political transition asks for stability.
Arthur Kroeber, managing director of Dragonomics, a research institution, says that the economic impact of the political cycle might be much weaker than in the past. With investment already accounting for nearly 50 per cent of GDP – unprecedented for major economies – China’s top leaders know they have to rein it in or risk a major crisis.
“I really do think this time is different because China has pretty much come to the limits of the capital intensive infrastructure-focused growth model,” Mr Kroeber says. “The incentives [for local officials] still exist, but the central government has a very, very strong incentive to squash that.”
- China, land of opportunities for foreigners? – Arthur Kroeber (chinaspeakersbureau.info)