Friday 13 May 2011

CHINA’S GROWTH

Business Standard

THE CHINA DEBATE

Growth in China may slow down, but excess domestic demand will ensure high growth rates

Akash Prakash

Business Standard, May 13, 2011

Getting China right is one of the most important calls investors have to make. The importance of China is driven by its impact on global growth, incremental consumption of commodities and its emergence as the second-largest economy in the world. If the economic boom in China persists, global economic growth will continue, emerging markets should continue to outperform and global commodity prices will be robust. However, if the bears are right, and we see a huge over-investment-related bust, industrial commodities will collapse, global growth will get a shock and all risk assets may encounter turbulence.

Both sides of the debate seem to agree that China will slow in 2011, and even 2012. Nobody expects China to continue growing at 10 per cent-plus, with expectations converging around 7 to 8 per cent in the foreseeable future. It is being agreed that domestic consumption will increasingly drive this growth. The Chinese government has introduced a slew of measures to raise consumption, such as lowering taxes, improving the social safety net and boosting workers’ disposable incomes.

The bulls believe that China will have a soft landing , exports will hold up and domestic consumption will accelerate — all this will compensate for some weakness in capital spending.

(...) [artículo aquí]

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