Follow-up on my 2010 growth prediction on China

Bonjour,

In January 2010, I wrote that I doubted that GDP growth could be maintained at 9% pa based on the economy rebalancing from investment towards consumption.

I argued that if investment was to slow down, consumption had to accelerate from the then high pace, with retail sales up 18-20% pa in nominal terms to pick up the slack.

Because of compounding, the additional retail sales in 2013e versus 2012e would have been equivalent to half the 2005 retail sales! And real retail sales growth would have had to be 15%+!

Current data do not suggest that pace : retail sales in the first half rose 12.7 percent year-on-year, a slower rate than the 14.4 per cent for the first six months of 2012.

Which means if the government is slamming on the brakes on the investment side, with lower than expected consumption growth, then Chinese GDP growth will probably lose at least half a point a year until it stabilises to potential, which is around 3% on my guesstimate (purely productivity gains as the labour force is not increasing anymore).


I suggested at the time that the local investors had seen it coming with the Shanghai index falling since a peak in 2009.
The Shanghai index has gone down another 30% since 2010. No wonder the Chinese savers are buying houses.