Apr 29, 2011

No Country Can Be Productive Enough To Reinvest Half Of GDP In New Capital Stock

No country can be productive enough to reinvest half of GDP in new capital stock without eventually facing immense overcapacity and a staggering non-performing loan problem.

Continuing down the investment-led growth path will exacerbate the visible glut of capacity in manufacturing, property and infrastructure, and thus will intensify the coming economic slowdown once further fixed-investment growth becomes impossible. Until the change of political leadership in 2012-13, China’s policymakers may be able to maintain high growth rates, but at a very high foreseeable cost. - in Project Syndicate

Related: iShares FTSE/Xinhua China 25 Index (ETF) (FXI), Morgan Stanley China A Share Fund, Inc. (CAF), PowerShares Gld Drg Haltr USX China(ETF) (PGJ), Aluminum Corp. of China Limited (ADR) (ACH), PetroChina (PTR), China Mobile (CHL)