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PeakTrader said...

Will China really surpass the U.S.?

Becoming the world's factory, where half of output is exported, requires massive investment.

Special Report: The Chinese consumer awakens
Dec 9, 2010

"Spending might be sturdy in China, but investment has been off the charts. As a result, consumption was just 35.6 percent of Gross Domestic Product in 2009, from 46.1 percent a decade earlier - and that was helped by a massive government stimulus to counter the global financial crisis.

Still, he doubted China's consumption share would reach the roughly 60 percent rate of the European Union, let alone the 70 percent rate of the United States."

Y = C + I + G + NX

C down, while I, G, and NX way up, or C increased at a much slower rate.

The goal has been to increase G at the expense of C, or government growth at the expense of (private) consumption growth.

Also, I may add, negative externalities, and relatively small gains-in-trade, from the "growth at any cost" policy aren't taken into account.

http://www.reuters.com/article/idUSTRE6B81BV20101209?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FtopNews+%28News+%2F+US+%2F+Top+News%29