Maybe Chinese Investment Makes Sense

Maybe Chinese Investment Makes Sense  

Moneybox
A blog about business and economics.
Dec. 28 2011 3:53 PM

Chart Of The Day: China's Investment

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The conventional wisdom is that China has a dangerously unbalanced growth model, with a preposterously low level of household consumption and a ridiculously high share of investment. Danny Quah in a bold and contrarian take that I'm not yet fully willing to endorse says this is all wrong, China's consumption is growing rapidly (as it should) and the high level of investment relative to GDP is sensible catch-up in a country that's still capital poor all things considered, offering the chart above of per capita investment as evidence.

In this view, as China continues to grow its investment share of GDP will decline as it approaches US levels of per capita investment. That right there, he says, is your global rebalancing strategy. I'll say on behalf of his view that we've genuinely never seen a country grow nearly as fast as China for nearly as long. Nobody really knows what that "should" look like.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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