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Home Publications Blogs Beat the Press NYT Says 12.4 Percent Growth in China Is "Sputtering"

NYT Says 12.4 Percent Growth in China Is "Sputtering"

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Wednesday, 16 July 2014 04:22

The NYT had a piece on the release of new data showing China's economy was 7.5 percent larger in the second quarter of 2014 than a year ago. While the piece noted that this is a healthy pace, even for China, it told readers:

"Three of the four cylinders of the Chinese economy — exports, private sector construction and retail sales — are sputtering."

It then went on to explain that the government sector is filling the gap with large-scale lending. Readers were then warned that this pattern cannot continue because China would reach the limits of its borrowing capacity.

"Some economists inside and outside the government say China has a choice: slow down lending and accept steady declines in economic growth each year, or continue heavy lending and risk a sharp drop in economic growth someday when the financial system begins to teeter. But nobody knows when that might happen."

If that sounds very scary then it's worth reading through to the last paragraph:

"Retail sales are growing strongly, up 12.4 percent in June from a year earlier, according to the government figures released Wednesday, nearly matching a pace of 12.5 percent in May."

As the article explains, real wages for factory workers are rising at more than an 8.0 percent annual rate. If that pace of real wage growth continues, the country should not have to worry about a lack of demand in the years ahead.

Comments (3)Add Comment
...
written by Last Mover, July 16, 2014 6:41

Goddamn commies. They're Keynesians through and through.

Just you wait China. Merika will be cleaning your economic clock any day now. As soon as the budget is balanced.

Any economist knows it's the long run that counts, when everyone is dead.
Hobson's choice
written by Peter K., July 16, 2014 11:02
"Some economists inside and outside the government say China has a choice: slow down lending and accept steady declines in economic growth each year, or continue heavy lending and risk a sharp drop in economic growth someday when the financial system begins to teeter. But nobody knows when that might happen."

It's always everywhere a dilemma. The possibility of other solutions is foreclosed.
Fiscal policy effective here as elsewhere - whatever you call it.
written by Amileoj, July 16, 2014 3:52
The upshot of the article seems to be that declining private sector investment in the housing sector is being replaced by increasing public sector investment. The writer almost seems to understand that the latter, funded by central government credit funneled directly to state owned enterprises and local governments, is a form of fiscal policy. But then comes the inevitable quote from a Western-trained financial economist (in this case Pettis) declaring that the resulting debt build up can't go on much longer. Lost is the point that, in transferring the burden of demand generation from private to public 'debt', the possibility of a credit crunch has been greatly reduced. The central government is never going to 'run out' of the ability to roll over non-performing loans to state-run enterprises and local governments (unless it chooses to do so for political reasons, of course).

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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