MacroscopeChina’s ‘train wreck’ economy mysteriously stays on track
Should we listen to the pessimists on China who refuse to throw in the towel?
China is “an economic and financial train-wreck which will rattle the world” wrote the never-shy David Stockman, director of the US Office of Management and Budget under President Reagan, in August 2015. Yet the locomotive that is the Chinese economy continues rolling along the tracks.
Data from the United Nations Conference on Trade and Development (UNCTAD) puts mainland China’s share of the global export market at 13.8 per cent last year, up from 12.33 per cent in 2014, while the figures for the United States were 9.13 per cent and 8.53 per cent respectively.
That 13.8 per cent figure is the highest share for any country, based on UNCTAD data, since the United States cornered 14 per cent of the global export market in 1968, at a time when China’s exports only accounted for 0.96 per cent of the total.
But even if the China export engine is still performing, China’s policymakers need to rebalance the economy away from an investment/export-led growth model.
An International Monetary Fund Working Paper , published last week, argued that “China has reached an inflection point where continuing with the old growth model will likely drag the economy into the middle-income trap or trigger a financial crisis.”