On 2013-08-22, at 1:28 PM, raghu wrote: > On Thu, Aug 22, 2013 at 7:30 AM, Marv Gandall <[email protected]> wrote: > > Chinese exporters at the lower end of the value chain have for some time been > losing business to firms relying on cheaper labour in Southeast Asia and > elsewhere, but it's not expected that the "corporate sector generally" will > be hurt by the state-driven rebalancing of the economy. It's anticipated that > corporations producing higher-end goods for the world market and those in the > rapidly expanding consumer goods and services sector will continue to be > profitable, barring a deeper crisis of the world economy. > > That's the point: Pettis (among others) claims that the numbers don't add up > for this scenario. > > Corporate profits in the aggregate come from confiscation of household > savings. Those profits MUST shrink in favor of household income - by > definition - under a rebalancing scenario. It is basically a zero-sum game: > there isn't any excess demand anywhere in the world to allow a positive-sum > dynamic. > > http://www.ft.com/cms/s/0/2f018d1c-f475-11e2-a62e-00144feabdc0.html > --------------------------------snip > (Pettis) Simple logic shows that it is nearly impossible for China’s GDP to > grow at current rates while rebalancing away from its dangerous over-reliance > on exports and debt-fuelled investment...This is why GDP growth rates must > drop further. But after many years of annual GDP growth above 10 per cent, it > would seem that a sharp drop in GDP growth rates to below 6-7 per cent would > clash with the rising expectations of ordinary Chinese. Won’t slower growth > lead to social unrest and perhaps political chaos? Not necessarily.
The debate isn't about whether Chinese GDP will drop during its next higher stage of development, but by how much, and whether it will result in an economic and social crisis. Even Pettis concludes this latter is unlikely even if China's growth rate is halved because it will continue to support rising living standards for most Chinese. Still, this is all very speculative - informed and interesting speculation all round - but just speculation nevertheless. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
