Previously was discussed that Chinese economy depends mostly on real estate and infrastructure development for its 10% GDP growth, while the export cannot growth that fast. The real estate shows all signs of a major bubble, however more research is needed to confirm that. So China has to grow its domestic consumption? Ideally yes. Let’s check the trend first. Private consumption was 55%/1980, 40%/2004, 36.4%/2006 – however it also reflects the growth of unregistered shadow economy. The real consumption is higher than numbers show but the trend is done. Reverting the trend is different than accelerating the existing trend. It means changing the economic model and I doubt it’s possible anytime soon as most goods China is exporting are simply too expensive for the domestic market. There is a political aspect in growing the domestic consumption. The cross-border money flow is under government control and all exporters are under tight control of the communist party and provide the political support in exchange of letting the business done. For any internally oriented producer the communist dictatorship is an obstacle, the sales are more profitable when population is free, confident and prosperous. Most of goods made in China are consumed by people […]
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