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China’s hard landing began last year, and it’s going to get worse

Video: Richard Duncan explains why he believes the era of China’s investment-led growth ended in 2014

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Economist and financial author Richard Duncan believes China’s economy entered into a hard landing in 2015, with the slowdown set to deepen into a slump that will prove to be “severe and protracted”.

At its core, a growth model that relied too heavily on investment and exports has left the economy deeply imbalanced, with few drivers that can now take up the slack.

Duncan has published a series of videos explaining why, in his opinion, China’s economic development model of export-led and investment-driven growth is now in crisis. The South China Morning Post brings you the second video in that series.

“Perhaps not since the Pharaohs built the pyramids with slave labour has investment made up such a large share of a country’s economy and household consumption made up so little,” Duncan said. “This enormous gap between investment and consumption means China’s economy is now wildly unbalanced.”

Richard Duncan. Photo: SCMP Handout
Richard Duncan. Photo: SCMP Handout

Underscoring the scale of China’s reliance on investment as an engine of growth, consider how much it has ramped up spending in this area in just a few short years, compared to that of the US, the world’s largest economy. In 2014, investment in the US was US$177 billion higher than 2007, a growth rate of 6%. In 2014, the level of investment in China was US$3.2 trillion more than it was in 2007, representing growth of 236 per cent.

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