Joint Economic Committee report on Chinese Economy

If you’ve got a few minutes, I highly recommend you read the Chairman Jim Saxton’s report to the Joint Economic Committee’s concerning the Chinese economy. You can download the PDF directly from the Congress website.

house.gov/jec/publications/109/07-26-05china.pdf

Non-market lending encouraged the state-owned enterprises and the state-influenced enterprises to invest in too many capital assets and the wrong types of capital assets to produce goods and services to satisfy market demand. The eventual liquidation of the resulting overinvestment or malinvestment poses a significant long-term risk to the continuation of the PRC’s economic growth. Given the PRC’s integration with the global economy, a significant slowdown or recession in the PRC could diminish the prospects for economic growth in the United States and other countries around the world.

There is no question about the misallocation of resources on the ground in China. Whether you’re talking about the vacant high-rise apartment buildings in Pu Dong, the high-rises occupied only on lower floors in Shenzhen and Hangzhou, the 16 terminal airport of Zhuhai that has 2 flights per day (TOTAL!), the hundreds of empty gas stations of Xinjiang, or the millions of other resource misallocatement projects I haven’t seen yet, this is definitely a risk that the CCP needs to address to continue long term GDP growth. You don’t want to turn into another 1990’s Japan…

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